Impact of Education Expenditure on the Economic Development. An Empirical Investigation in Case of Kuwait

It is a proven fact that investment in education always increases economic growth and is considered as one of the main pillar of human capital interest. It's contribution in return for skilled labor, which ultimately leads towards economic development with a healthy lifestyle. The objective of this study is to explore the relationship between education expenditure and economic development. For this purpose, we have used different econometric techniques. These include unit root analysis to check stationarity, Johannsen Cointegration to judge long-run relationship, VAR for lag selection criteria, Vector Error Correction Model (VECM) to review the dynamic stability of long-run equilibrium. The study incorporates impulse response function and variance decomposition analysis to find out responsiveness of economic growth to the shock imposed on predictors. Furthermore, Granger Causality test has also been applied to check the direction of causality among variables. The study has used annual data started from 1980 to 2016 and obtained from world development indicators of World Bank and the central bureau of statistics Kuwait. Results indicate that there exists a strong positive and significant relationship between education and economic development in the case of Kuwait.