Abstract
There has been consensus on the notion that education
results in economic prosperity and growth in many countries. This has resulted
in a strong focus on education policy, with large investments and a lot of
public debates concerning the subject. Various schools of thought have made differing
suggestions about how government spending impacts economic growth over the
years. The Keynesian view is that there is a positive relationship between
government spending and economic growth, where the causal effect runs from
government spending to economic growth. Conversely, the Neo-classical school
asserts that the relationship between the two variables is negative. The topic,
therefore, remains a debatable issue. The impact of government spending on
economic growth depends on what it spends its money on. Globally, education is
regarded as one of the primary drivers of economic growth. There is no doubt
that education is one of South Africa’s to domestic priorities. However,
despite the vast literature for developing economies, there seems to be a dearth
in the literature on the nexus between government education expenditure on
economic growth in South Africa. The present study, therefore, tests the causal
effect of education expenditure on economic growth in South Africa for the
period 1994 to 2021, with the aid of the autoregressive distributed lag
approach and Granger causality test. Consistent with Keynesian theory, the
study results confirm the positive impact of government spending on economic
growth. A Granger causal relationship exists between government education
expenditure and economic growth, indicating that over time, education
expenditure positively impacts economic growth through human capital. This
implies that investing (spending) in education is critical in promoting
economic growth, especially in the long term.
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