Government expenditure on education and economic growth in South Africa

Abstract

Education is one of the most important factors influencing a country's progress, welfare, and level of economic and social development. Therefore, this study aims to empirically investigate the relationship between government expenditure on education and economic growth in South Africa. The study employed annual time series data spanning from 2000 to 2021. The data was analysed by means of the Autoregressive distributive lag technique and Granger causality analysis. The findings revealed that government spending on education and economic growth are positively related in South Africa. Furthermore, the findings revealed that government expenditure on education granger causes economic growth, implying that in the long run, government educational expenditure, through its impact on human capital, positively influences economic growth. The results also revealed that reveal that in the short run, education expenditure and gross fixed capital formation have a positive impact on economic growth. This demonstrates that any investment (spending) on education is a critical factor in significantly promoting economic growth, especially in the long-term. Another implication is that, as the government invests more funds in education, this tends to boost human capital, which in turn, is translated into economic growth in the long run.