Government expenditure on higher education and economic growth: an empirical study on Sri Lanka

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.