Education Expenditures and Economic Growth: Evidence from Ghana

Abstract

This study investigated the relationship between education expenditure and economic growth in Ghana.   Vector error correction and cointegration analysis are employed to test for the causal relationship between the variables for the period 1970 to 2012. The empirical results show a positive and significant long-run relationship between education expenditures and real GDP, gross capital formation as well labor force participation. The results indicate that education contributes meaningfully to the long-term growth of Ghana’s economy. Also, in the short-run, Granger causality runs both directions between economic growth and education expenditures. The results may provide some insights into how the formulation and implementation of appropriate fiscal policies relating to education could help improve the quality of education and thereby contributes to economic development of Ghana. Additionally, the study may serve as a guide in the reform of Ghana’s education policies leading to improved learning and educational outcomes.

Keywords: Economic growth, Education Expenditure, Vector Error Correction Model