The impact of government educational expenditure on economic growth in Ghana

Abstract

The purpose of this is to examine the relationship between components of educational expenditure and economic growth. The study considered the impacts of expenditure on tertiary, secondary and primary education on economic growth. The study employed quantitative research design to analyse relationship between educational expenditure and economic growth in Ghana. The study employed annual time series data spanning from 1980 to 2019. Data was sourced from World Development Indicators (WDI) 2020, Globaleconomy.com, Ghana Statistical Service (GSS) and Bank of Ghana (BoG). The study tested for unit root and co-integration to ascertain the existence of stationarity and long run relationship among the variables. Based on the result of the unit root test, ARDL and Error Correction (EC) model was adopted. The result shown that there exists long run relationship between components government educational expenditure and economic growth. The study found that expenditure on primary education was statistically insignificant in the long run. The result indicates that in the long run, government educational expenditure (secondary and tertiary), through its impact on human capital, significantly and positively influence economic growth and this means that education contributes meaningfully to the long-term growth of Ghana’s economy. It was found that the impacts of expenditure on tertiary education on economic growth is greater than the impacts of expenditure on secondary education on economic growth. The study further revealed that there exists uni-directional granger causality between government education spending and economic growth. That is, it was found that only educational granger causes economic growth but economic growth does not granger cause education expenditure. The study recommend that government should encourage more spending on tertiary education in the form of scholarship to tertiary students, spending on research and developments which will in the long run increase productivity and hence economic growth. Inter-relationships between government expenditure and education quality should be taken into account when formulating education policy to promote economic growth in Ghana.