Impact of Return on Education on Economic Growth in EU Countries

Abstract

The objective of this article is to assess the impact of returns on the education and professional skills of workers on economic growth in EU countries. Based on open data, two principal components were formed to identify the aggregated influence of selected indicators on GDP growth. These principal components allow for the evaluation of the degree of influence of education and professional skills of workers on GDP growth for each country. Countries were clustered according to the degree of influence of the obtained principal components on the level of economic development using the k-means method. As a result, 20 EU countries were divided into three clusters. The first cluster consists of developed countries with a high share of innovations. The sec-ond cluster includes developed countries with a lower share of innovations than the first cluster and moderate values of the return on education. The third cluster includes countries with a large share of non-innovative sec-tors. Subsequently, a regression model was constructed to analyse the influence of each component on GDP growth. Based on the comparison of coefficient values, it was concluded that the increase in the relationship between the level of education and GDP growth in EU countries is observed with the increase in the innovative and technological components of the economy.