Education and Economic Growth: Evidence from the EUROMED Countries

Abstract

The Mediterranean Strategy on Education for Sustainable Development (MSESD) Report reveals that the Mediterranean is an exceptional eco-region not only due to its geographical characteristics, but also its heterogeneous economic structure, in which education is regarded as a key driver of sustainable development. Given this importance, this study attempts to investigate the impact of education as a channel for human capital accumulation on two different growth concepts in a panel group of eight Euro-Mediterranean Partnership (EUROMED) countries. We utilize an endogenous growth model using annual observations spanning from 2000 to 2017 by employing the Augmented Mean Group (AMG) estimator. Empirical results obtained from the Augmented Mean Group estimator indicate a positive impact of education, regardless of the growth proxy. In addition, empirical findings reveal that the impact of education on inclusive growth is five times higher than that on output growth. We also find that capital is the main driver of growth while inclusive growth is primarily triggered by education. One of the main policy implications raised in this study is that education reforms that attempt to improve educational quality will assist policymakers to achieve sustainable development goals. Extensive policy discussions related to the experiential findings are also provided.