Education and Economic Growth: an OECD Panel Study

In this study we empirically test the hypothesis that education matters on economic growth. Based on theories of human capital development, we postulate that education leads to economic growth. Education expenditures and enrollment rates in primary, secondary, and tertiary educations are especially chosen as independent variables to test if they have an impact on economic growth, or per capita GDP in our regression. To consider the heteroskedasticity of error terms, we turn to GLS regression to see the effects of education factors on economic growth. In addition, we divide the OECD panel data into two subsets; Group A as a relatively high income country group and Group B as a low income group. Overall, education variables turn out to be significant in explaining per capita GDP growth. In group A, or relatively wealthy group, enrollment in tertiary education sector tend to be significantly important, reflecting that educational effects on economic growth tend to be even stronger in highly knowledge-driven countries in OECD.