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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
JUNE 2011
VOL 3, NO 2
Figure 2 CUSUMSQ Test Result
Plot of Cumulative Sum of Square of Recursive Residuals
1.6
1.2
0.8
0.4
0.0
-0.4
1975 1980 1985 1990 1995 2000 2005
CUSUM of Squares
5% Significance
Figures 1 and 2 reveal that the stability of coefficient estimates is not supported because
both the plots do not fall within the critical values. It indicates that the long-run relationship
between education expenditure and economic growth is unstable in Pakistan.
V. Conclusion
The main objective of this study was to analyze the impact of education expenditure on
economic growth for the period 1972 to 2008. Results of the study provide strong evidence of
unidirectional causality from the GDP growth to educational expenditure. This means
educational expenditures are dependent on economic growth in Pakistan.
Educational expenditures play an important role in the development process of economy
like Pakistan. In Pakistan, the allocation of resources for education sector is insufficient to meet
the current requirements of the sector. Pakistan needs to design policies and programs for
improving the quality of education. These educational policies should attract highly qualified
professionals from abroad. For this purpose, the role of Higher Education Commission (HEC)
for improving the quality of higher education needs to be strengthened. The Government of
Pakistan should pay adequate attention in discouraging brain drain through providing reasonable
opportunities to the highly qualified professional within the country. There is a need that the
government should initiate various policies which must be consistent with the country’s needs
and can help the educated professionals in securing appropriate jobs within the country.
Furthermore, educational expenditures especially for elementary, technical and scientific
education need to be expanded.
A major limitation of the study is that it includes only one independent variable. It means
our analysis of the relationship between education and economic growth seems to be not free
from simultaneity bias. Analysis of this relationship calls for further research by including more
regressors like capital, labour and openness, etc. in the model.
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