The impact of Education Expenditure, Tertiary Enrolment and Innovation on Economic Growth in South Africa.
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Date
2015
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Abstract
The primary focus of this study is to employ a Cob-Douglas production function to estimate relationship between the GDP and it determinants viz. labour, capital, tertiary enrolment, education expenditure and innovation for South African economy over a period 1983 to 2012. This task will be accomplished by applying cointegration techniques, Johansen’s (1988) vector autoregression (VAR) methodologies and error correction mechanisms to capture short run disequilibrium between GDP and it determinants. Specifically the main objective of this study is to investigate how labour, capital, education expenditure, tertiary enrolment and innovation impacted on economic growth in South Africa. Moreover this study will attempt to study the dynamic interactions between the variables - economic growth, labour, capital, tertiary enrolment, expenditure on education and innovation - under consideration in order to identify long and short run relationship. However before the empirical analysis is conducted the study will first attempt to explain the relevant theories of growth and the experiences of the emerging economies, which will then serve as basis for examining South African growth experiences and policy prescription, for the purposes of understanding the South African growth phenomenon and choosing appropriate determinates of economic growth.
The study found that the VECM, FMOLS, CCR, DOLS and ARDL methods strongly suggest the existence of a long run cointegrating relationship between economic growth, labour, capital, enrolment, expenditure and innovation that is consistent with economic theory in all cases except for the ARDL model. The ARDL model generated a negative long run coefficient capturing the effect of education expenditure on economic growth; while the remainder of the models all concurs that there is a positive relationship. Moreover all the single equation models agree that labour, capital, education expenditure, enrolment and patents all have a statistically positive impact on economic growth.
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labour analysis, capital, enrolment, tertiary education, South Africa economy, Cob-Douglas