Government Expenditure on Education and Economic Growth: An Econometric Study

Abstract

The increase in government expenditure on education is commonly considered to have a positive effect on economic growth by raising GDP per capita. This essay aims to examine the effectiveness of education investment in driving economic growth. The panel Ordinary Lease Square (OLS) model is used to establish a regression model with data sets for Asian least developed, developed, and developing countries from 1995 to 2015 and a case study on China and Malaysia. The regression model manifests public spending on education as having a stimulative effect on economic growth in countries that have a stable and relatively more developed economy. The case study investigated the relationships between six factors relating to the government’s expenditure in education and found that investment in secondary schools has a strong relationship with prominent economic returns.