Educational Expansion and Economic Growth Nexus in Pakistan: Instrumental Variable Approach

This study examines the relationship between economic growth and the expansion of education in Pakistan. The study utilizes 2SLS and GMM estimators to estimate the growth equations with a potential issue of endogeneity using data for the period 1973-2018. Empirical results show that educational expansion at the primary and secondary level effect economic growth positively. The evidence is quite compelling that the effect of educational expansion on economic growth is low due to the poor quality of education. Also, the lower effect of physical capital is due to lower human capital embodied in the labor force. Keywords: human capital; economic growth; GMM; Endogeneity; Pakistan. JEL Classification: O47, I21, C2