The impact of public education spending on economic growth in Central and Eastern Europe. An ARDL approach with structural break

Figures & data

Table 1. The structure of the education systems 2020/21.

Countries Age of students	0	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23
Bulgaria
Croatia
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Poland
Romania
Slovakia
Slovenia

Source: European Commission/EACEA/Eurydice, 2020. The Structure of the European Education Systems 2020/21: Schematic Diagrams. Eurydice Facts and Figures. Luxembourg: Publications Office of the European Union., compiled by authors.

Legend: Levels and types of education.

Figure 1. Total general government expenditure on education, 1990–2020 (% of GDP).

Source: Eurostat 

Table 2. The impact of public education spending on economic growth.

Authors	Countries	Period	Methodology	Variables	Results
Acemoglu et al. (2006)	OECD countries	1965-1995	Cross-sectional regression	GDP growth, school years	Positive effect
Annabi et al. (2011)	Canada	1995-2002	Overlapping-generations model	GDP growth, Public expenditure on education	Inconclusive effect
Barro (2001)	100 countries	1960-1995	panel regression	Real GDP growth, school attainment (primary, secondary and tertiary) levels, Government consumption/ Rule-of-law index, Openness, Inflation	Inconclusive effect for primary level Positive effect for secondary level
Bassanini & Scarpetta (2001)	21 OECD countries	1971-1998	Panel regression	GDP per capita, school years, R&D spending, population growth	Positive effect
Blankenau et al. (2007)	23 developed countries	1960-2000	Panel regression	GDP growth, Education spending, Taxation, Gross enrollment	Positive effect
Cullison (1993)	USA	1952-1991	VAR model	Real GDP growth, government expenditures by function	Inconclusive effect
Dao (2012)	28 developing economies	2000-2010	Simultaneous Equation model	GDP per capita growth, public expenditures on health and education per capita, Internet users, R&D expenditure, exports	Positive effect
Dissou et al. (2016)	Benin	1990-2015	Endogenous growthmodel	GDP Growth, government education spending, Fiscal instruments, Consumption	Positive effect
Ifa & Guetat (2018)	Tunisia and Morocco,	1980-2015	ARDL approach	GDP per capita, Public education expenditure, Gross enrolment, School life expectancy, Inflation	Positive effect for long term Positive effect for short term for Morocco Negative effect for short term for Tunisia
Kiran (2014)	18 Latin American countries	1970–2009	VECM	GDP per capita, Public education expenditure,	Mixed results
Mallick et al. (2016)	14 major Asian countries	1973- 2012	Panel VECM	GDP growth, Expenditure on education	Positive effect
Wang (2005)	Canada	1961-2000	VECM	Government expenditure on education and health, Private investment, Public debt, Social Expenditure	positive effects
Zeira (2009)	Israel	1970-2005	Endogenous growth model	GDP growth, Public education expenditure, investment	Negative results

Source: compiled by authors.

Table 3. Variables used in analysis.

	Definition	Source	Unit
GDP real growth	a measure of the economic activity, defined as the dynamics of this over time, by the value of all goods and services produced less the value of any goods or services used in their creation.	Eurostat/World Bank	Percentage
Education government spending	all government current expenditures for purchases of goods and services in education (including compensation of employees).	Eurostat	Ratio of GDP
GFCF	Investments intended for use in processes of production.	Eurostat/ World bank	Ratio of GDP
Labor	measure the involvement of people in the labour market.	Eurostat/ World bank	Ratio to total population
Trade openess	the sum of exports and imports of goods and services	Eurostat/ World bank	Ratio of GDP
Dummy	Before structural break =0, after structural break =1

Source: compiled by authors.

Table 4. Statistics descriptive mean.

	GDPgr	EducExp	GFCF	Labor	Trade
BGR	1.633	3.741	21.779	74.036	104.838
CZE	2.080	4.317	29.091	77.609	119.612
EST	4.105	5.410	29.241	80.736	143.669
HRV	2.250	4.719	23.129	73.892	81.892
HUN	2.289	5.358	24.208	75.799	139.130
LTU	4.319	4.012	26.234	79.500	150.730
LVA	4.045	5.301	26.154	81.786	100.703
POL	3.792	5.090	21.462	80.477	75.156
ROU	2.329	3.454	24.345	80.447	72.799
SLV	3.184	5.251	24.933	79.263	122.078
SVK	2.317	4.012	26.234	79.500	140.624

Source: author’s calculations.

Table 5. Augmented Dickey-Fuller test statistic.

	GDPgr		EducExp		GFCF		Labor		Trade
	I(0)	I(1)	I(0)	I(1)	I(0)	I(1)	I(0)	I(1)	I(0)	I(1)
BGR	−0.352* (0.904)	−4.669* (0.001)	−2.491* (0.128)	−6.693* (0.000)	−1.885* (0.333)	−6.862* (0.000)	−3.944* (0.005)		−2.213* (0.206)	−7.763* (0.000)
CZE	−0.987* (0.743)	−5.693* (0.000)	−1.114* (0.696)	−5.916* (0.000)	−1.681* (0.429)	−3.956* (0.005)	−1.916* (0.319)	−8.662* (0.000)	−4.847* (0.000)
EST	−1.100* (0.700)	−3.903* (0.006)	−2.060* (0.261)	−5.579* (0.000)	−3.109* (0.037)		−1.910* (0.322)	−4.135* (0.003)	−2.320* (0.172)	−4.905* (0.000)
HRV	−1.121 (0.692)	−5.870* (0.000)	−2.018* (0.277)	−3.845* (0.007)	−2.323* (0.172)	−3.312* (0.024)	−3.439* (0.018)		−0.671* (0.838)	−5.030* (0.000)
HUN	0.047** (0.955)	−3.014* (0.045)	−1.907* (0.324)	−3.872* (0.006)	−2.070* (0.257)	−3.464* (0.016)	−3.042* (0.042)		−1.733* (0.404)	−4.050* (0.004)
LTU	0.222** (0.969)	−3.786* (0.007)	−1.637* (0.451)	−4.393* (0.001)	−3.125* (0.036)		−1.570* (0.484)	−4.926* (0.000)	−0.852* (0.788)	−5.320* (0.000)
LVA	−0.667* (0.838)	−4.128* (0.003)	−5.206* (0.000)	−3.650* (0.013)	−2.025* (0.275)	−4.273* (0.002)	−2.109* (0.242)	−3.993* (0.004)	−4.796* (0.000)
POL	−1.408* (0.560)	−7.421* (0.000)	−2.605* (0.104)	−4.020* (0.004)	−3.878* (0.006)		−4.423* (0.001)		−0.494* (0.877)	−4.729* (0.000)
ROU	−0.142* (0.935)	−3.966 (0.005)	−2.017* (0.278)	−3.828* (0.007)	−2.034* (0.271)	−3.967* (0.005)	−2.713* (0.083)	−4.679* (0.000)	−8.601* (0.000)
SLV	−0.168* (0.932)	−4.242 (0.002)	−2.491* (0.127)	−4.600* (0.001)	−1.292* (0.618)	−3.934* (0.005)	−4.664* (0.000)		−4.413* (0.001)
SVK	−0.383* (0.899)	−3.878 (0.006)	−2.355* (0.162)	−4.573* (0.001)	−5.485* (0.000)		−4.289* (0.002)		−3.509* (0.015)

*,**,*** the significance level at 1%, 5%, and 10% respectively.Explanations: first row coefficient; second row ( ) probability;.

Source: author’s calculations.

Table 6. Zivot and Andrews test for unit roots with one structural break.

	GDPgr		EducExp		GFCF		Labor		Trade
	t-Statistic	break point	t-Statistic	break point	t-Statistic	break point	t-Statistic	break point	t-Statistic	break point
BGR	−4.675*	1997	−4.920*	1998	−4.229*	1998	−4.217*	2000	−5.455*	2004
CZE	−3.464*	2004	−3.504*	2007	−3.504*	1998	−3.221*	2010	−4.514*	2014
EST	−5.569*	2009	−4.858*	2000	−5.658*	2009	−7.670*	1998	−4.623*	2010
HRV	−3.921*	2009	−6.150*	2010	−4.217*	2009	−7.339*	1998	−5.425*	2009
HUN	−4.684**	2009	−4.054*	2011	−1.890*	2015	−4.229*	2012	−3.802*	2000
LTU	−3.821*	2003	−3.982*	1997	−6.053*	2009	−4.322*	2004	−3.745*	2010
LVA	−4.473*	2005	−6.476*	2012	−4.677*	2009	−4.686*	2006	−4.176*	2012
POL	−4.501*	2006	−12.170*	1996	−3.462**	2015	−4.172*	2008	−4.254**	1997
ROU	−4.337*	2004	−4.591*	2005	−5.491*	2007	−5.634*	2002	−5.567*	1998
SLV	−5.456*	2009	−4.256*	2001	−3.742*	2009	−4.521*	1996	−5.302*	2004
SVK	−4.989*	2006	−4.492*	2013	−4.475*	2002	−3.484*	2012	−7.249*	2004

*,**,*** the significance level at 1%, 5%, and 10% respectively.Explanations: first row coefficient; second row ( ) probability;.

Source: author’s calculations.

Table 7. Bound testing for existence of a level relationship.

	ARDL	F – Statistics	Outcome
BGR	ARDL(3, 3, 3, 3, 3, 3)	19.589*	Cointegration
CZE	ARDL(3, 2, 3, 2, 3, 2)	16.230*	Cointegration
EST	ARDL(3, 3, 3, 2, 2, 2)	4.287*	Cointegration
HRV	ARDL(3, 0, 2, 3, 1, 2)	3.429*	Cointegration
HUN	ARDL(1, 0, 0, 2, 0, 2)	10.554*	Cointegration
LTU		3.048*	No Cointegration
LVA	ARDL(1, 2, 2, 0, 2, 1, 0)	9.042*	Cointegration
POL		2.139*	No Cointegration
ROU		3.002*	No Cointegration
SLV		2.971*	No Cointegration
SVK		3.030*	No Cointegration

Lower-Upper bound: 5%: I(0) 2.17 I(1) 3.21; 10% I(0) 1.92 I(1) 2.89Critical values from Pesaran et al. (2001).

Source: author’s calculations.

Table 8. Estimated long-run coefficients for economic growth.

	EducExp	GFCF	Labor	Trade	Dummy GDP	CointEq(-1)
BGR	−1.363*** (0.104)	0.440*** (0.109)	2.678*** (0.132)	1.719*** (0.011)	−0.490*** (0.191)	−0.259*** (0.000)
CZE	0.350*** (0.001)	−0.655*** (0.005)	−2.353*** (0.001)	0.213*** (0.006)	0.086*** (0.001)	−0.762*** (0.000)
EST	2.436*** (0.076)	4.061*** (0.013)	1.625*** (0.083)	−2.833*** (0.006)	1.634*** (0.002)	−0.439*** (0.000)
HRV	−0.144*** (0.161)	0.385*** (0.006)	0.222*** (0.323)	1.631*** (0.005)	−0.121*** (0.359)	−0.348*** (0.000)
HUN	1.421*** (0.013)	1.277*** (0.046)	−0.462*** (0.691)	0.555*** (0.000)	0.385*** (0.077)	−0.121*** (0.000)
LVA	−1.488*** (0.020)	−15.569*** (0.034)	1.269*** (0.065)	3.504*** (0.033)	−0.579*** (0.297)	−0.209*** (0.000)

*** the significance level at 1%, 5%, and 10% respectively.Explanations: first row coefficient; second row ( ) probability.

Source: author’s calculations.

Table 9. Estimation of short-run relationship.

	D(EducExp)	D(EducExp(-1))	D(EducExp(-2))	D(GFCF)	D(Labor)	D(Trade)
BGR	−0.046*** (0.009)	0.198*** (0.000)	0.109*** (0.002)	0.221*** (0.000)	−0.874*** (0.003)	0.381*** (0.000)
CZE	0.115*** (0.000)	−0.086*** (0.001)		−0.283*** (0.001)	−5.364*** (0.000)	−0.037*** (0.251)
EST	0.371*** (0.016)	−0.877*** (0.000)	−0.191*** (0.221)	0.937*** (0.001)	1.177*** (0.001)	−1.037*** (0.000)
HRV	−0.048*** (0.064)	0.164*** (0.000)		−0.131*** (0.001)	0.015*** (0.569)	0.201*** (0.015)
HUN	0.229*** (0.000)			0.170*** (0.000)	−0.239*** (0.000)	0.107*** (0.001)
LVA	−0.198*** (0.000)	0.074*** (0.029)		0.080*** (0.004)	0.215*** (0.113)	0.204*** (0.000)

*, **,*** the significance level at 1%, 5%, and 10% respectively. Explanations: first row coefficient; second row ( ) probability.

Source: author’s calculations.

Table

	Early childhood education and care (for which public education authorities are not responsible)
	Early childhood education and care (for which public education authorities are responsible)
	Primary education
	Single structure
	Secondary general education
	Secondary vocational education
	Post-secondary non-tertiary education
	Tertiary education (full-time)

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