Education and economic growth a causal analysis

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Box 1346 Ann Arbor, MI 48106-1346 Copyright by SHARMISTHA SELF, 2002 All Rights reserved Ì Dissertation Approval The Graduate School Southem Mlinois University April 5, 2002 T hereby recommend that the dissertation prepared under my supervision by Sharmistha Self Entitled Education and Economic Growth: A Causal Analysis be accepted in partial fulfillment of the requirements for the DOCTOR OF PHILOSOPHY degree C In X7 ire Head of Depariment Recommendation concurred in 1 AL \ pA > ew crm Final Examination Ce a Xs (14 đ+-s.„— i AN ABSTRACT OF THE DISSERTATION OF SHARMISTHA SELF, for the Doctorate of Philosophy degree in ECONOMICS, presented on 12/07/2001, at Southern Illinois University at Carbondale. TITLE: EDUCATION AND ECONOMIC GROWTH: A CAUSAL ANALYSIS MAJOR PROFESSOR: DR. RICHARD GRABOWSKI This dissertation is an empirical exercise in a time-series framework, which seeks to analyze the causal relation between different levels of education and economic growth. This study targets twelve Asian countries categorized by geographic region and state of economic growth.

The importance and positive influence of human capital on growth has long been established, though, the acceptance of this premise has not been unanimous. There is even less agreement among the limited number of studies which have targeted the different levels of education and/or the role of gender. Levels of education, by definition, determine the depth of knowledge and hence are important tools for determining the extent of human capital formation in a country. This study takes an in-depth look not just at correlations but also tests the causal relationship between education at different levels and growth and vice-versa.

Once education is segregated by levels, this study finds the correlations and causal relations to vary between levels of education and levels of growth of different countries. Thus, in spite of education being a consumer good, different levels appear to have different appeals for a country, depending perhaps upon its economic needs, and, consequently, to the policy maker. The results show that economic growth is caused by primary education of the labor force for the relatively poorer countries of South Asia while the relatively wealthier economies of South East and East Asia are driven by tertiary education. Model specification with the inclusion of gender produces robust results, which show that gender participation at different education levels plays a causal role in growth, though the direction of impact varies between genders.

The results show that the role of gender at different education levels is linked to the level of development of a particular country or region rather than to the degree of gender participation in education. DEDICATION I dedicate this dissertation to my mother and father whose dreams I helped fulfill by embarking on this journey and whose faith in me prevented me from ever giving up. LIST OF TABLES Table 2.1: Per Capita Output (South Asia) Table 2.2: Per Capita Output (South East Asia) ‡ Table 2.3: Per Capita Output (East Asia) Table 2.4: Growth Rates (South Asia) 45 Table 2.5: Growth Rates (South East Asia) 45 Table 2.6: Growth Rates (East Asia) Table 2.7 Correlation with per capita growth (South Asia) 65 Table 2.8 Correlation with per capita growth (South East Asia) 65 Table 2.9 Correlation with per capita growth (East Asia) 66 Table 2.10: Impact of Primary Education on Economic Growth in South Asia 70 Table 2.11: Impact of Primary Education on Economic Growth in South East Asia 70 Table 2.12: Impact of Primary Education on Economic Growth in East Asia Table 2.13: Impact of Secondary Education on Economic Growth in South Asia 3 oa Table 2.14: Impact of Secondary Education on Economic Growth in South East Asia Table 2.15: Impact of Secondary Education on Economic Growth in East Asia ‘3 Table 2.16: Impact of Tertiary Education on Economic Growth in South East Asia 73 Table 2.17: Impact of Tertiary Education on Economic Growth in East Asia Table 2.18: Impact of Economic Growth Ratio on Primary Education in South Asia 74 Table 2.19: Impact of Economic Growth on Primary Education in South East Asia 74 Table 2.20: Impact of Economic Growth on Primary Education in East Asia 75 Table 2.21: Impact of Economic Growth on Secondary Education in South Asia 76 : Impact of Economic Growth on Secondary Education in South East Asia 76 Table 2.23: Impact of Economic Growth on Secondary Education in East Asia 76 IV Table 2.24: Impact of Economic Growth on Tertiary Education in South East Asia 77 Table 2.25: Impact of Economic Growth on Tertiary Education in East Asia 77 Table 2.26: Impact of Different Education Levels on Economic Growth 78 Table 2.27: Impact of Economic Growth on Education Levels 8l Table 2.28: Impact of Primary Education on Growth (Panel method) $4 Table 2.29: Impact of Secondary Education on Growth (Panel method) 86 Table 2.30: Impact of Tertiary Education on Growth (Panel method) 87 Table 2.31: Impact of Economic Growth on Primary Education (Panel method) 88 Table 2.32: Impact of Economic Growth on Secondary Education (Panel method) 89 Table 3.1 Partial Correlations with per capita growth (South Asia) 117 Table 3.2 Partial Correlations with per capita growth (South East Asia) 117 Table 3.3 Partial Correlations with per capita growth (East Asia) 117 Table 3.4: Impact of gender-based primary education on growth (South Asia) 119 Table 3.5: Impact of gender-based primary education on growth (South East Asia) 120 Table 3.6: Impact of gender-based primary education on growth (East Asia) 120 Table 3.7: Impact of gender-based secondary education on growth (South Asia) 124 Table 3.8: Impact of gender-based secondary education on growth (South East Asia) 124 Table 3.9: Impact of gender-based secondary education on growth (East Asia) 124 Table 3.10: Impact of growth on male primary education (South Asia) 128 Table 3.11: Impact of growth on female primary education (South Asia) 128 Table 3.12: Impact of growth male primary education (South East Asia) 129 Table 3.13: Impact of growth on female primary education (South East Asia) 129 Table 3.14: Impact of growth on male primary education (East Asia) 129 Table 3.15: Impact of growth on female primary education (South East Asia) Table 3.16: Impact of growth on male secondary education (South Asia) Table 3.17: Impact of growth on female secondary education (South Asia) Table 3.18: Impact of growth on male secondary education (South East Asia) Table 3.19: Impact of growth on female secondary education (South East Asia) Table 3.20: Impact of growth on male secondary education (East Asia) Table 3.21: Impact of growth on female secondary education (East Asia) 134 Table 3.22: Impact of primary education by gender on growth — Panel Method 138 Table 3.23: Impact of secondary education by gender on growth — Panel method 140 Table 3.24: Impact of growth on male primary education — Panel method 142 Table 3.25: Impact of growth on female primary education ~ Panel method 142 Table 3.26: Impact of growth on male secondary education ~ Panel method 144 Table 3.27: Impact of growth on female secondary education — Pane! method 145 Table 4.1: Gender-gap(%) in enrollment rates at primary level 156 Table 4.2: Gender-gap (%) in enrollment rates at secondary level 157 Table 4.3: Average Participation of Children in the labor force (%) 159 Table 4.4: Average Participation of Females in the labor force (%) 160 Table 4.5: Simple correlations between male and female enrollment rates and log (per capita real gdp) in South Asia 166 Table 4.6: Simple correlations between male and female enrollment rates and log (per capita real gdp) in South East Asia 166 Table 4.7 : Simple correlations between male and female enrollment rates and log (per capita gdp) in East Asia 166 vì Table 4.8: Tests of Unit Roots 168 Table 4.9: Number of Co-integrating equations in models | and model 2 (primary level) 170 Table 4.10: Number of Co-integrating equations in models | and model 2 (secondary level!) I7I Table 4.11: Direction of Long-run Impact on log(per capita output) 172 Table 4.12: Short-run Causal Relations: South Asia (Model 1!) 175 Table 4.13: Short-run Causal Relations: South Asia (Model! 2) 174 Table 4.14: Short-run Causal Relations: South East Asia (Mode! 1) 176 Table 4.15: Short-run Causal Relations: South East Asia (Model 2) 176 Table 4.16: Short-run Causal Relations: East Asia (Model 1) 177 Table 4.17: Short-run Causal Relations: East Asia (Model 2) 178 vil LIST OF FIGURES Figure 2a: Primary Enrollment Rate in South Asia Figure 2b: Primary Enrollment Rate in South East Asia Figure 2c: Primary Enrollment Rate in East Asia Figure 2c: Pupil Teacher Ratio at Primary Level in South Asia Figure 2d: Pupil Teacher Ratio at Primary Level in South East Asia Figure 2e: Pupil Teacher Ratio at Primary Level in East Asia Figure 2f: Expenditure Per Student in South Asia (% of GNP) Figure 2g: Expenditure Per Student in South East Asia (% of GNP) Figure 2h: Expenditure Per Student in East Asia (% of GNP) Figure 2i: Secondary Enrollment Rate in South Asia Figure 2j: Secondary Enrollment Rate in South East Asia Figure 2k: Secondary Enrollment Rate in East Asia Figure 21: Pupil Teacher Ratio at Secondary Level in South Asia Figure 2m: Pupil Teacher Ratio at Secondary Level in South East Asia Figure 2n: Pupil Teacher Ratio at Secondary Level in East Asia Figure 20: Enrollment Rate at Tertiary Level in South East Asia Figure 2p: Enrollment Rate at Tertiary Level in East Asia Figure 3a: Female Primary Enrollment Rate in South Asia 106 Figure 3b: Male Primary Enrollment Rate in South Asta 106 Figure 3c: Female Primary Enrollment Rate in South East Asia 107 Figure 3d: Male Primary Enrollment Rate in South East Asia 108 Figure 3e: Female Primary Enrollment Rate in East Asia 109 viti Figure 3f: Male Primary Enrollment Rate in East Asia 110 Figure 3g: Female Secondary Enrollment Rate in South Asia Figure 3h: Male Secondary Enrollment Rate in South Asia Figure 3i: Female Secondary Enrollment Rate in South East Asia Figure 3j: Male Secondary Enrollment Rate in South East Asia Figure 3k: Female Secondary Enrollment Rate in East Asia Figure 31: Male Secondary Enrollment Rate in East Asia Figure 4a: Per Capita Real GDP TABLE OF CONTENTS Abstract Dedication List of Tables List of Figures vIn Chapter 1: Introduction — 1.1 Brief Survey of Literature — 1.4 Education Variables and Data Sources Ty 1.5 Precedence of Education Level for Growth in Developing Countries NO 1.6 The Role of Gender in Explaining the Relation between Education and Growth tao t 1.7 Economic Impact of Gender Participation at Different Education Levels 1.