Philippine E-Journals

Comparative Analysis on Education and Economic Growth in the Philippines and China: a vector error correction approach

Ronaldo R. Cabauatan | Peter Jeff Camaro | Leandro S. Estadilla

 

Abstract:

Education has always been a boon to society, however different countries shows different priorities regarding education. With the coming of the fourth industrial revolution does investment in human capital still contribute enough to the economic growth of a country. This study examines the effects of education expenditure on different levels of education to the GDP of both China and Philippines, the causality between education expenditure and economic growth in the Philippines and China was also identified through the Granger Causality test to identify if there is a uni- directional or a bi-directional relationship between education and economic growth. This paper examines the long-run relationship of the indicators affecting education expenditure using vector error correction model. The structural stability test was also used to examine the stability of the coefficients of the model between different time periods as this will provide insights concerning the stability or consistency despite the economic environment in previous years. The specification error test was applied to determine if there is specification error in the results together with the unit root test in determining the stationarity of the time series data that may result to spurious regression output. Lastly, the study utilized the White heteroskedasticity test to determine if the variance of the residual is constant, unbiased and no outliers.