E3 Journal of Business Management and Economics

E3 Journal of Business Management and Economics Vol. 5 (5) pp. 109-119, August 2014; © E3 Journals; ISSN 2141-7482

Linkages between education expenditure and economic growth: Evidence from CHINDIA

Harpaljit Kaur¹, A.H.Baharom¹^*, Muzafar Shah Habibullah²
¹ Taylors Business School, Taylors University, 47500, Subang Jaya, Malaysia
² Faculty of Economics and Management, Universiti Putra Malaysia, 43500, Serdang, Malaysia
^*Corresponding Author E-mail: baharom.abdulhamid@taylors.edu.my
Accepted 22 May 2014

Abstract

This paper examines the relationship between education expenditure and economic growth in China and India by employing annual data from 1970 to 2005. This study utilizes multi econometric tools such as the Johansen-Juselius (1990) co-integration test, Ordinary Least Square (OLS) method, Dynamic Ordinary Least Square (DOLS), Vector Error Correction Model (VECM) as well as variance decomposition to obtain a robust and consistent result. The findings indicate that there exists a long run trending relationship between income level (Gross Domestic Product per capita (GDPpc) and education expenditure in both China and India. In the long run, a unidirectional causal relationship could be detected for both countries, running from income level to education expenditure for the case of China, while for the case of India education expenditure Granger causes income level. The results are robust and consistent across all methods.

Keywords: Education Expenditure; Economic Growth; China; India; DOLS; VECM

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