Analysing the effects of selected economic indicators on education and on the causality between education and economic growth of the Philippines

Abstract

The study estimates the impact of inflation, unemployment and population on the education in the Philippines. This study determines the causality between the education expenditure and GDP. This study used the structural stability test to examine the stability of the coefficients of the model between different time periods despite the economic environment in previous years. Findings show that education expenditure granger causes economic growth as what introduced by the endogenous growth theory which emphasized the importance of education on economic growth, in estimating education on the economic growth of the Philippines as education conduit for accumulation of human capital that will have an effect to economic growth. This shows the value of the educated labor force in the Philippine economy, even though the study encountered difficulty in gathering data, specifically for education expenditure as a consequence of limited data published by the government. Findings also show that population and unemployment are statistically significant on education expenditure while inflation is statistically insignificant. This suggests that high demand in education due to an increase in population and unemployment will increase the education expenditure.

5-ASEAN Countries and China on Education and Economic Growth: A Vector Error Correction Analysis

“…Moreover, in the study of Brown (2007), that in Malaysia, practice of education is seen as a tool in nation building. With this information, education and economic growth may have a two-way causation or bi-directional causality as mentioned in the study of Basten and Cuaresma (2014), Cabauatan et al (2016) and Cabauatan and Manalo (2018). Afzal et al (2011) had similar findings that there is bi-directional causality between education and economic growth.…”

“…As the education expenditure increases, economic growth of a nation increases as well; additionally, as the growth of the economy increases, expenditure in education increases. This shows a two-way causation or bi-directional causality between education and economic growth (Afzal et al, 2011; Al-Yousif, 2008; Basten & Cuaresma, 2014; Cabauatan & Manalo, 2018; Cabauatan et al, 2016). This indicates that education expenditure affects economic growth and, at the same time, economic growth affects education.…”

“…If the government will increase investment in education, there will be more schools available in the community and may provide quality education in different areas. Having access to education may result in a higher chance of employability (Cabauatan & Manalo, 2018; Cabauatan et al, 2016). Hawley (2004) highlighted that demand on education is high because of higher expected returns and to improve human capital composition.…”