The Relationship between Educational Expenditure and Economic Growth: The Case of Turkey

Abstract

Education displays a high impact on the development level occurrence of the countries. Therefore, education spending in a country can lead to significant increases in the economic growth of the country, which is one of the important indicators of the welfare level of the countries. Empirical studies in the literature find different results from time to time on the effect of education expenditures on economic growth. While many studies have shown that education expenditure has positive effects on the economic growth of the country, the causal relationship between these variables is mostly from educational expenditures to economic growth. In some empirical studies, it is emphasized that the causality relationship between these two variables is two-way. However, much fewer studies have shown that there is no relationship between spending on education and economic growth. In this study, the relationship between economic growth and education expenditure was investigated for the period of 1998:Q1 and 2019:Q4 in Turkey. After examining whether the series used in the study were stationary, a cointegration analysis was conducted to determine whether there is a cointegration relationship between education expenditures and economic growth variables. Moreover, Granger causality test is done to analyze the direction of the relationship between education expenditure and economic growth. The results of the study shows that education expenditures have an important impact on economic growth in Turkey. Therefore, education policies should be developed in order to increase the development level of the country.

Education displays a high impact on the development level occurrence of the countries. Therefore, education spending in a country can lead to significant increases in the economic growth of the country, which is one of the important indicators of the welfare level of the countries. Empirical studies in the literature find different results from time to time on the effect of education expenditures on economic growth. While many studies have shown that education expenditure has positive effects on the economic growth of the country, the causal relationship between these variables is mostly from educational expenditures to economic growth. In some empirical studies, it is emphasized that the causality relationship between these two variables is two-way. However, much fewer studies have shown that there is no relationship between spending on education and economic growth. In this study, the relationship between economic growth and education expenditure was investigated for the period of 1998:Q1 and 2019:Q4 in Turkey. After examining whether the series used in the study were stationary, a cointegration analysis was conducted to determine whether there is a cointegration relationship between education expenditures and economic growth variables. Moreover, Granger causality test is done to analyze the direction of the relationship between education expenditure and economic growth. The results of the study shows that education expenditures have an important impact on economic growth in Turkey. Therefore, education policies should be developed in order to increase the development level of the country.