The relationship between education and economic growth: A Granger causality test

Abstract

The major aim of this study was to examine the relationship between education and Economic growth using the granger causality test. This study used secondary time series data obtained from World Bank (2017) development indicators and Uganda Bureau of Statistics for the period, 1992:1-2015:4. This study also tested for stationarity among variables using unit root test based on Augmented Dickey Fuller test. Further, the study tested for co-integration among the variables based on Johansen’s co-integration test and the result confirmed one co integrating equation between GDP and education thus exhibiting long run relationships. The study estimated the Error correction model because of its flexibility of combining both the short run and long run dynamics and the analysis revealed primary enrollment had positive relationship whereas secondary had a negative relationship to GDP. The results as well show that there is a bi-directional causality between education (number of graduates) and economic growth. It was also verified that education specifically the primary enrollments have a strong impact on economic growth in Uganda. This study recommends there should be economic reform policies that favor primary education because it lays a foundation upon which higher enrollments base.