Education and economic growth in Pakistan: A cointegration and causality analysis

Abstract

This study explored the cointegration and causality between education and economic growth in Pakistan by using time series data on real gross domestic product (RGDP), labour force, physical capital and education from 1970–1971 to 2008–2009 were used. Autoregressive Distributed Lag (ARDL) Model of Cointegration and the Augmented Granger Causality Approach given by Toda and Yamamoto (1995) were applied. Cointegration among economic growth and education has been found. The findings of this study also indicate the existence of the feedback causality between education and all levels of education with economic growth. Among all levels of education, general higher education causes economic growth highly and most significantly while the level of confidence of causing economic growth to school education is found to be the highest. Labour force as compare to physical capital appeared to be a key factor in understanding the relationship between education and economic growth. This study recommends more investment in university education so that economic growth can be further accelerated, that in turn, leads to further education and hence economic growth.