Reexamine the Impacts of Education Expenditure, Capital Formation, Human Capital and Expert Labor on Malaysian Economic Growth

Abstract

This study aims to reexamine the relationships between selected macroeconomic variables, especially the expenditure on education, on growth of Malaysian economy. Specifically, the exogenous variables in this study comprise of government education expenditure, investment, human capital and expert labor. For analysis purpose, this study adopts the time series data from 1988 until 2018. The estimated model is developed by employing ordinary least square technique (OLS). Outcome of this study discloses that human capital is the most crucial variable in elucidating Malaysian economic growth in the long term. Additionally, the study findings affirm that the government expenditure on education and capital formation are second and third outstanding variables in clarifying the economic growth in the observation time frame, respectively. Surprisingly, this particular study discovers that labor force expertise is irrelevant in influencing economic growth for Malaysia case. Consequently, the results of this study are parallel with other previous studies, especially on the roles that have been played by all variables aforementioned above. Albeit insignificant, expert labor still gives little impact to Malaysia’s economic growth at 10% confidence level. The reason being, as a high middle income country, human capital has more profound effect in promoting economic growth in Malaysia due to its ability to generate remarkably higher productivity for the nation compares to expert labor factor. For future study, further dynamic analysis is needed to prove the variables’ relationships in the short and long terms.