Abstract:
The modern economy is becoming more knowledge-intensive and service-oriented, which consider
the role of human capital is more important for economic growth of a country. Therefore, education
is the main channel of governments’ influence on human capital formation. Due to this, it changes as
an important research subject in the field of economic growth. Government expenditure on higher
education is an investment in human capital because it leads to raise skill formation and thus
increases the ability to work and produce more. Higher education spending of Government is very
important for economic growth of a country and plays a vital role in promoting national
development also. This study focuses on Government expenditure on higher education and
economic growth in Sri Lanka for the period from 1991- 2017. In order to achieve the objective,
time series data was collected from the authorized sources. The study completely based on
secondary data. Multiple regressions model and Minitab package were used for the analyzing. Findings
from the study show that economic growth (GDP) is positively related with selected variables
namely government expenditure on higher education, labour force participation and domestic fixed
capital formation. This indicates the role of government spending on higher education play a vital
role in economic growth. Thus the study recommends that the government should increase the
expenditure on higher education sector in order to improve the economic performances and
achieve the desired positive effects in the economy.
