Main Article Content

Plabita Bhattacharyya


Public Expenditure, Economic Growth, Panel Data, Causal Relation, Cointegration, ross State Domestic Product


Purpose of the Study: The aim of the study is to find the causal relationship between public expenditure on education and the economic growth of 28 states of India. The paper tries to provide an answer to the research question of whether or not there exists any causal relationship between public expenditure on education and economic growth in the states of India. It also aims to investigate whether public expenditure creates economic growth or economic growth is the cause of public expenditure.

 Methodology: To examine the relationship between public expenditure on education and economic growth panel data of 28 states of India has been used in the study. To find the causal relation cointegration test has been applied. To examine the short-run and long-run dynamics between public expenditure on education and economic growth the study has adopted the Panel Vector Error Correction model.

Main Findings: The result of the study indicates that there exists a long-run relationship between public expenditure on education and economic growth. A unidirectional causality between Gross State Domestic Product (GSDP) and public expenditure on education is found in the long run. The meaning is that as growth takes place in the Indian states it pushes the government to increase its activities which stimulate an increase in public expenditure.

Applications of this study: This study can be useful for the formulation of government policy. It can also be useful for students and research scholars.

Novelty/Originality of this study: In this research work, a causal relationship is examined between economic growth and government expenditure especially in the education sector which is a major component of human resource development. All states are considered which are included in underdevelopment index and categorized as least developed; less developed and relatively developed states on the basis of some key socio-economic components.


Download data is not yet available.


Metrics Loading ...
Abstract 18 | PDF Downloads 17 XML Downloads 1 ePUB Downloads 10


1. Abizadeh, S., & Gray, J. (1985). Wagner’s Law: A Pooled Time –Series, Cross-Section Comparison. National Tax Journal, 38(2), 209-218. Retrieved from
2. Babalola, S. J. (2011). Long-Run Relationship between Education and Economic Growth: Evidence from Nigeria.International Journal of Humanities and Social Science, 1(14), 123-128.
3. Burney, N. A. (2002). Wagner’s Hypothesis: Evidence from Kuwait Using Cointegration Tests. Applied Economics, 34, 49-57.
4. Chandra, A. (2011). Nexus between Government Expenditure on Education and Economic Growth: Empirical Evidences from India. Romanian Journal for Multidimensional Education, 3(6), 73-85. Retrieved from
5. Chang, T. (2002). An Econometric Test of Wagner’s Law for Six Countries Based on Cointegration and Error-Correction Modelling Techniques. Applied Economics, 34, 1157-1169.
6. Chakraborty,K. S. & Krishnankutty, R. (2012). Education and Economic Growth in India .MPRA Paper, No 48524, Indira Gandhi National Open University, Kolkata Regional Centre, ICFAI University,Tripura. Retrieved from Accessed 14 March 2019.
7. Dastidar, S. H. & Chatterji, M. (2015). Public Expenditure in Different Education Sectors and Economic Growth: The Indian Experience. MPRA Paper, No 66903. Retrieved from Accessed 14 March 2019.
8. Gregoriou, A., & Ghosh, S. (2009). The Impact of Government Expenditure on Growth: Empirical Evidence from A Heterogeneous Panel. Bulletin of Economic Research, 61(1), 95-102. Retrieved from
9. Hussin, M. Y. Muhammad, F. & Razak, A.B. (2012). Education Expenditure and economic Growth: A Causal Analysis for Malaysia.Journal of Economics and Sustainable Development, 3(7), 71-81.
10. Idrees, A. S. & Siddiqi, M.W. (2013). Does Public Expenditure Cause Economic Growth? Comparison of Developed and Developing Countries.Pakistan Journal of Commerce and Social Sciences, 7(1), 174-183. Retrieved from
11. Im, K. S., Pesaron, M.H. &Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 115( 2), 53-74.
12. Kao, C. (1999). Spurious Regression and Residual-Based Tests for Cointegration in Panel Data. Journal of Econometrics, 90 (1), 1-44. PII: S0304-4076(98)00023-2
13. Levin, A., Lin, C.F. &Chu, C. (2002). Unit Root Tests in Panel Data: Asymptotic and Finite-Sample Properties. Journal of Econometrics, 108(1),1 -24. PII:S0304-4076(01)00098-7
14. Mallick, L., Das, P.K. & Pradhan, K.C. (2016). Impact of Educational Expenditure on Economic Growth in Major Asian Countries: Evidence from Econometric Analysis. Theoretical and Applied Economics, XXIII(2 ), 173-186.
15. Menyah, K., & Rufael, Y. W. (2013). Government Expenditure and Economic Growth: The Ethiopian Experience, 1950-2007. The Journal of Developing Areas, 47(1), 263-280. Retrieved from
16. Mukit, D. M. A. (2012). Public Expenditure on Education and Economic Growth: The Case of Bangladesh.International Journal of Applied Research in Business Administration & Economics, 01(04), 10-18. Retrieved from
17. Nasiru, I. (2012). Government Expenditure and Economic Growth in Nigeria: Cointegration Analysis and Causality Testing. Academic Research International, 2(3), 718-723. Retrieved from
18. Ohlan, R. (2012). Causality between Government Expenditure and Economic Growth in India: An Empirical Investigation. Finance India, XXVI(4), 1275-1290.
19. Pedroni, P. (1999). Critical Values for Cointegration Tests in Heterogeneous Panels With Multiple Regressors.Oxford Bulletin of Economics and Statistics, 61(S1),653-670.
20. Pedroni, P. (2004). Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with An Application to the PPP Hypothesis. Econometric Theory, 20(3), 597-625. DOI: 10.1017/S0266466604203073 Retrieved from
21. Ray, M., Sarangi, M. &Mishra, S. (2019). Public Expenditure and Economic Development: Regional Analysis of India. Economic &Political Weekly” LIV(10), 50-56.
22. Singh, B., & Sahni, B.S. (1984). Causality Between Public Expenditure and National Income. The Review of Economics and Statistics, 66(4), 630-644. Retrieved from
23. Solaki, M. (2013). Relationship between Education and GDP Growth: A Bi-variate Causality Analysis for Greece.International Journal of Economic Practices and Theories, 3(2), 133-139.
24. Srinivasan, P. (2013). Causality between Public Expenditure and Economic Growth: The Indian Case. International Journal of Economics and Management, 7(2), 335-347.
25. Taiwo, M., & Abayomi, T. (2011). Government Expenditure and Economiv Development: Empirical Evidence from Nigeria. European Journal of Business and Management, 3(9), 18-28.
26. Taneja, M. L.,& Myer, R.M. (2013). Economics of Development & Planning. New Delhi: Vishal Publishing Co.
27. Zoran, T.(2015). Analysis of the Impact of Public Education Expenditure on Economic Growth of European Union and BRICs. Economic Analysis, 48(1 -2), 19-38.
28. Verma, S., & Arora, R. (2010). Does the Indian Economy Support Wagner’s Law? An Econometric Analysis. Eurasian Journal of Business and Economics, 3(5), 77-91.