Revisiting the effect of government education expenditure on economic growth in Malaysia: Using disaggregate approach

This study aims to estimate the effects of education expenditure on economic growth in Malaysia, using annual data from 1980 to 2012. The Malaysian government has invested a lot on the education, however, it appears that the innovation, productivity and technology advancement are not improving as expected in order to produce a bettereducated labour force for accelerating the economic growth. Therefore, there is need to re-examine the effect of government education expenditure on economic growth. This study also takes a closer look at the effects of levels of education on economic growth. The finding indicates that there is a positive effect exists between the economic growth and federal government development in the long-run. This study also reported the existence of a positive effect between the levels of education and economic growth in the long-run. The empirical findings of Granger causality based on the error-correction model estimate indicates unidirectional causality runs from economic growth to development education expenditure. This study also reports the unidirectional causality runs from the economic growth to secondary and tertiary levels of attainment. The role of government expenditure on education and levels of education, especially the secondary and tertiary education level seems to be very important and significantly explains economic growth of Malaysia. Therefore, this study suggests that the government should make investments in education, especially in quality inputs such as teaching and learning process, skills and technology aspects in order to create higher skilled human capital, which leads to the skilled labor force, later leads to the better economic growth which is in line with the national aspiration to become a high income economy by the year 2020. High income economy ones can be achieved if we have a highly skilled human capital in the entire fiel