DOES EDUCATION INVESTMENT DRIVE GROWTH? A PANEL DATA INVESTIGATION OF SAARC ECONOMIES

Abstract

The study examines the effect of education expenditure on economic growth in the SAARC region based on panel data for the period 2000-2023. By looking into the critical macroeconomic indicators government investment on education (proportion of total expenditure), FDI, human capital index, labor force participation rate and GDP growth this analysis examines the contribution of investments in education on long run economic growth. The study uses dynamic panel data analysis using Generalized Method of Moments (GMM) approach, controlling for country-specific effects, endogeneity and autocorrelation for robust empirical evidence. The findings show that education expenditure has shown positive effect on growth but it is insignificant and the Human capital index instead have a very strong and significant effect as well Labor force participation rate, stressing the relevance of the quality and the outcomes of education and health. The results indicate that the SAARC countries need to focus on investing in human capital as well as on increasing the efficiency of education to achieve sustainable growth.