Education and Economic Growth in Developing Countries: Empirical Evidence from GMM Estimators for Dynamic Panel Data

Wafa Sebki

doi:10.2478/eb-2021-0002

Education and Economic Growth in Developing Countries: Empirical Evidence from GMM Estimators for Dynamic Panel Data

Authors

Wafa Sebki University of Abou Bakr Belkaid https://orcid.org/0000-0003-3369-9252

DOI:

https://doi.org/10.2478/eb-2021-0002

Keywords:

Developing countries, Economic growth, Education, Human capital, Panel data

Abstract

The paper aims at studying the effect of education measured by enrolment ratios in secondary and higher education on economic growth measured by the rate of GDP growth in a sample of 40 developing countries during the period from 2002 to 2016 using the dynamic panel data estimators. The results of estimating the model of this study using the difference GMM estimator or what is known as the Arellano and Bond estimator showed that the proportions of those enrolled in tertiary education had a significant positive effect on economic growth, while the proportions of those enrolled in secondary education had a significant negative effect.

References

Abdouni, A., & Hanchane, H. (2010). Investissement Direct Etranger, Capital Humain et Croissance Economique: Etude Empirique en Donnees de Panel. AMSE. Nr. 2010-06.

Acaroğlu, H., & Altun Ada, A. (2014). The Relation Between Human Capital and Economic Growth in MENA Countries. Journal of Public Administration and Governance, 4(3), 205. https://doi.org/10.5296/jpag.v4i3.6127

Aceleanu, M. I. (2012). Links Between Education, Employment and Quality of Life. The Case of Romania. Management & Marketing Challenges for the Knowledge Society, 7(4), 717–730.

Anderson, T. W., & Hsiao, C. (1982). Formulation and Estimation of Dynamic Models using Panel Data. Journal of Econometrics, 18(1), 47–82. https://doi.org/10.1016/0304-4076(82)90095-1

Anupam, D., & Biru, P. P. (2011). Openness and Growth in Emerging Asian Economies: Evidence from GMM Estimations of a Dynamic Panel. Economics Bulletin, 31(3), 2219–2228.

Arellano, M., & Bover, O. (1995). Another Look at the Instrumental Variable Estimation of Error Components Models. Journal of Economics, 68(1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-D

Arrelano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and Application to Employment Equations. Review of Economic Studies, 58(2), 277–297. https://doi.org/10.2307/2297968

Baum, C. F. (2013). Dynamic Panel Data Estimator. Applied Econometrics. Boston College.

Becker, S. G. (1964). Human Capital: A Theoretical and Empirical Analysis, With Special Reference to Education. New York: National Bureau of Economic Research. https://doi.org/10.1177/000271626536000153

Blundell, R., & Bond, S. (1998). Initial Conditions and Moment Restrictions in Dynamic Panel Data Models. Journal of Economics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8

Bond, S. R., Hoeffler, A., & Temple, J. (2001). GMM Estimation of Empirical Growth Models. Retrieved from http://www.nuff.ox.ac.uk/Economics/papers/2001/w21/bht10.pdf

Bonnefond, C. (2014). Growth Dynamics and Conditional Convergence Among Chinese Provinces: A Panel Data Investigation Using System GMM Estimator. Journal of Economic Development, 39(4). https://doi.org/10.35866/caujed.2014.39.4.001

Cooray, A. (2009). The Role of Education in Economic Growth. Asian-Pacific Economic Literature, 23(1), 1–20. http://doi.org/10.1111/j.1467-8411.2009.01220.x

Eggoh, J., Houeninvo, H., & Sossou, G.-A. (2015). Education, Health and Economic Growth in African Countries. Journal of Economic Development, 40(1), 93–111.

Ellery, R., Paes de Barros, R., & Grosner, D. (2013). Labor productivity Determinants for the Strategy on Sustainability and Promotion of the Middle Class.

Freimane, R., & Bāliņa, S. (2016). Research and Development Expenditures and Economic Growth in the EU: A Panel Data Analysis. Economics and Business, 29, 5–11. https://doi.org/10.1515/eb-2016-0016

Ganic, M. (2020). Are Determinants of International Financial Integration in the European Transition Countries Different from Post-Transition Countries? Studies in Business and Economics, 15(1), 40–54. https://doi.org/10.2478/sbe-2020-0005

Girgin, S. C., Nguyen, H., & Karlis, T. (2017). Revisiting the Effect of Financial Development on Economic Growth After the 2008 Global Financial Crisis. Advances in Economics and Business, 5(8), 456–465. http://doi.org/10.13189/aeb.2017.050804

Gökhan, U. (2015). Impact of Human Capital on Economic Growth: A Panel Data Analysis.

Goumrhar, H. (2017). Human Capital, Inequality and Economic Growth in Developing countries: Analysis in Panel Data. Int. Journal of Innovation and Applied Studies, 20(2), 441–460.

Hanif, N., & Arshed, N. (2016). Relationship Between School Education and Economic Growth: SAARC Countries. International Journal of Economics and Financial Issues, 6(1), 294–300.

Hansen, L. P. (1982). Large Sample Properties of Generalized Method of Moments Estimators. Econometrica, 50(04), 1029–1054. https://doi.org/10.2307/1912775

Holtz-Eakin, D., Newey, W., & Rosen, H. S. (1988). Estimating Vector Autoregressions With Panel Data. Econometrica, 56, 1371–1395. https://doi.org/10.2307/1913103

Hou, N., & Chen, B. (2013). Military Expenditure and Economic Growth in Developing Countries: Evidence From System GMM Estimates. Defence and peace economics, 24(3), 183–193. https://doi.org/10.1080/10242694.2012.710813

Imbens G. W. (2002). Generalized Method of Moments and Empirical Likelihood. American Statistical Association Journal of Business & Economic Statistics, 20(4), 493–506. https://doi.org/10.1198/073500102288618630

Karaçor, Z., Güvenek, B., Ekinci, E., & Konya, S. (2017). Relationship with Education Expenditure and Economic Growth in OECD Countries: A Panel Data Analysis.

Kimaro, E. L., Keong, C. C., & Sea, L. L. (2017). Government Expenditure, Efficiency and Economic Growth: A Panel Analysis of Sub Saharan African low-income countries. African Journal of Economic Review, 5(2), 34–54.

Lenka, S. K., & Sharma, P. (2014). FDI as a Main Determinant of Economic Growth: A Panel Data Analysis. Annual Research Journal of SCMS, Prune, 1, 84–97. Retrieved from https://www.scmspune.ac.in/chapter26/7.pdf

Liming, H. (2014). The Dynamic Relationship Between Real Estate Investment and Economic Growth: Evidence from Prefecture City Panel Data in China. IERI Procedia, 7, 2–7. https://doi.org/10.1016/j.ieri.2014.08.002

Lingaraj, M., Pradeep, K. D., & Kalandi, C. P. (2016). Impact of Educational Expenditure on Economic Growth in Major Asian Countries: Evidence from Econometric Analysis. Theoretical and Applied Economics, XXIII(607), 173–186.

Nurnaddia, N., & Nurhaiza, N. (2016). Determinants of Innovation in Developing Countries: A Panel Generalized Method of Moment Analysis. Jurnal Ekonomi Malaysia, 50(2), 93–105. http://dx.doi.org/10.17576/JEM-2016-5002-08

Ogundari, K., & Awokuse, T. (2018). Human Capital Contribution to Economic Growth in Sub-Saharan Africa: Does Health Status Matter More Than Education? Economic Analysis and Policy, 58, 131–140. https://doi.org/10.1016/j.eap.2018.02.001

Ogunleye, O., Owolabi, O. A., Sanyaolu, O., & Lawal, O. (2017). Human Capital Development and Economic Growth in Nigeria. Journal of Business Management, 3(8), 17–37.

Papke, L. E., & Wooldridge, J. M. (2004). A Computational Trick for Delta Method Standard Errors. Economics Letters, 86(3), 413–417. https://doi.org/10.1016/j.econlet.2004.07.022

Ping, H. (2005). How Does Education at All Levels Influence Productivity Growth? Evidence from the Chinese Provinces. CERDI, working papers. CNRS-Université d’Auvergne.

Piper, A. T. (2014). The Benefits, Challenges and Insights of a Dynamic Panel Assessment of Life Satisfaction. MPRA Paper (59556). Retrieved from https://mpra.ub.unimuenchen.de/id/eprint/59556

Presbitero, A. F. (2006). The Debt-Growth Nexus in Poor Countries: A Reassessment. Economics: The Open-Access, Open-Assessment E-Journal, 2(2008-30), 1–28. https://doi.org/10.5018/economics-ejournal.ja.2008-30

Pribac, L., & Anghelina, A. (2015). Human Capital –The Effects of Education on Economic Growth Within the European Union. Studia Universitatis “Vasile Goldis” Arad – Economics Series, 25(3), 35–44. https://doi.org/10.1515/sues-2015-0020

Roodman, D. (2009). How to Do Xtabond2: An Introduction to Difference and System GMM in Stata. The Stata Journal, 9(1), 86–136. https://doi.org/10.1177/1536867X0900900106

Sadni-Jallab, M., Gbakou, M., & Sandretto, R. P. (2008). Foreign Direct Investment, Macroeconomic Instability and Economic Growth in MENA Countries. GATE Working Paper No. 08–17. https://doi.org/10.2139/ssrn.1170764

Schultz, T. W. (1961). Investment in Human Capital. American economic review, 51(1), 1–17.

Sezer, S., & Abasiz, T. (2016). Determinants of Economic Growth: An Application with Unbalanced Panel Analysis in OECD Countries. The Journal of Visionary, 7(16), 89–99. https://doi.org/10.21076/vizyoner.265474

Solow, M. R. (1957). Technical Change and The Aggregate Production Function. The review of economics and statistics, 39(3), 312–320. https://doi.org/10.2307/1926047

Trpkova, M., & Tashevska, B. (2011). Determinants of Economic Growth in South – East Europe: A Panel Data Approach. Perspectives of Innovations, Economics and Business, 7(1), 12–15. https://doi.org/10.15208/pieb.2011.03

UNESCO. (2015). Education for All 2000–2015: Achievements and Challenges.

UNESCO. (2017). Accountability in Education: Meeting Our Commitments.

World Bank. (2019). World Development Indicators.

Youssef, A. H., El-Sheikh, A. A., & Abonazel, M. R. (2014). Improving the Efficiency of GMM Estimators for Dynamic Panel Models. Far East Journal of Theoretical Statistics, 47(2), 171–189. Retrieved from https://mpra.ub.uni-muenchen.de/id/eprint/68675