Role of Knowledge in Supporting Growth across Indian States: A Co-Integration and Causality Approach

Abstract

This paper uses cointegration and vector error-correction models to analyse the causal relationship between education and development across select Indian states using annual data from 1980-81 to 2008-09. Expenditure on education per capita is used as the proxy for education, while State domestic product per capita is the proxy for development. The empirical results provide some evidence of bi-directional causality in Indian States such as Kerala, Karnataka, Andhra Pradesh, Maharashtra and Tamil Nadu. There is also evidence of causation running from per capita expenditure on education to per capita State domestic product in either the short or long run in states such as Bihar, Arunachal Pradesh, Uttar Pradesh, West Bengal, Punjab, Orissa, Madhya Pradesh, Gujarat, Rajasthan, Haryana and Punjab. Thus, there is some indication that the observed positive correlation across states between expenditure on education and growth reflects primarily the influence of government effective intervention in the education sector

Impact of Foreign Capital on Economic Development in India: An Econometric Investigation

“…If the null hypothesis is rejected, then it implies that time series is non-stationary at a given significance level. It is necessary to take higher differentiation of the data to make it stationary (Banik & Khatun, 2012). Augmented Dicky-Fuller test is more preferable due to its stable critical values and its power to different sampling experiments (Granger, 1969).…”