bba economics

Topics: Economics, Capital accumulation, Economic growth Pages: 15 (2217 words) Published: December 15, 2013


Relationship between Education and Economic Growth in Pakistan: A time series analysis.

Zaheer Khan Kakar, M.Phil Fellow, Department of Economics, National University of Modern Languages(NUML), Islamabad.

Dr Bashir Ahmad Khilji, Head Department of Economics, National University of Modern Languages (NUML), Islamabad.

Muhammad Jawad Khan, Lecturer, Department of Economics, Balochistan University of Information Technology, Engineering & Management Sciences (BUITEMS), Quetta.

Abstract
Education is one very important factor of human capital formation. The objective of this paper is to examine the long-run relation between education expenditures and economic growth in Pakistan. Time series data is used for the period 1980-2009 for analysis and co-integration and error correction models are used to determine the long and short run relationship of education and economic growth. In this study, an attempt is made to determine and analyse the educational trends policy, trends of education, and challenges and it role in economic development in Pakistan. The study also presents policy measures for education sector for human capital formation and escalates economic growth in Pakistan.

Keywords
Pakistan, human capital, education, Economic Growth. Time series, co-integration, error correction.

1. Introduction
Education is universally acknowledged a primary tool to promote economic development. It plays a fundamental part in developing human capital and escalates economic growth by improving skills, increasing competency, and productivity. The education brings benefits for the whole society and the individuals. For developing country like Pakistan, education plays a key role in poverty reduction, and removing both social and income inequalities.

This study focuses on the question that, "whether improvement in education sector brings improvement in economic growth in Pakistan. Generally, it can be said that education does effect the economic development because it is considered as one major factor of improving human capital. Practically, there is difference among researchers as to whether the education have positive or negative relation with economic growth, or in some cases the studies indicates no impart of education expenditure on economic growth.

Barro (1991) finds a positive relationship between education expenditures and economic growth. De Meulmester and Rochet (1995) concludes that the relationship is not always positive between education and economic growth. Benhabib and Spiegel, (1994) acknowledge the human capital development as a source of economic growth.

Gemmell (1996) determine that, both human capital and their growth rates as main determinants of economic growth. Rodriguez and Rodrik (1999) point out that normally the instruments used to determine the relationship are not suitable.

According to Bils and Klenow, (2000), "Countries having high rate of enrollment in schools made faster growth in per capita income because high enrollment rate causes rapid improvement in productivity". Hanushek and Kimko (2000) show that quality of education have a remarkable impact on productivity and national growth rates.

Education can play its role in economic growth and benefit the society and individual as well. For individual education increases employment opportunities and higher income and improved life quality. The objective of this study is to determine the relationship between education expenditure and economic growth in Pakistan.

2.Education Sector in Pakistan
Education is the key issue to improve living standards and to reduce social and income inequality. Different Governments in Pakistan have taken numerous steps to improve the quality of education. According to the Education Statistics of 2008-9 Shows that literacy rate was high in urban areas (74%) then the rural areas (48%). Literacy rate in men are more the women's, as for men (69%) compared to women (45%). Province wise...
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