Education and economic growth in South Africa: An empirical investigation

Abstract

This paper examines the dynamic causal relationship between education and economic growth in South Africa using annual time-series data from 1986-2017. The study attempts to answer one critical question: Does education, which is one of the priority sectors in South Africa, drive economic growth? Unlike some of the previous studies, this study uses three proxies to measure the level of education in South Africa, namely: education expenditure, primary school enrolments, and secondary school enrolments. In addition, the study uses two variables, namely: investment and labour, as intermittent variables between the various proxies of education and economic growth – thereby estimating a system of multivariate Granger-causality models. Using the ARDL-bounds testing approach, the study finds that the causal relationship between education and economic growth is dependent on the variable used to measure the level of education. In addition, the causality tends to change over time. When education expenditure is used as a proxy, a unidirectional causal flow from economic growth to education is found to prevail both in the short run and in the long run. When primary school enrolment is used as a proxy, a unidirectional causal flow from economic growth to education is also found to prevail, but only in the short run. However, when secondary school enrolment is used as a proxy, education is found to Granger-cause economic both in the short run and in the long run, but economic growth is also found to Granger-cause education in the short run. Overall, the study finds the causal flow from economic growth to education to supersede the causal flow from education to economic growth. Policy implications are discussed.