Economic growth and education in Morocco: Cointegration and Toda Yamamoto Granger Causality

Abstract

This paper aims to investigate the cointegration and causal effect of economic growth and education in the case of Morocco, over the period 1990 to 2019. Education in all of it’s forms, considered a fundamental factor of development. Therefore, a country needs to invest more in education. Without a significant investment in education (or human capital), no country can achieve sustainable economic development. 

Several studies have used various proxies for education, which is the enrollment rate at primary, secondary and tertiary levels (Chatterji, 1998). However, in our study, the quantity dimension of education is proxies by primary, secondary, and tertiary enrolment ratios and an education index.

To investigate the relationship between education and economic growth the Auto-regressive Distributed Lag (ARDL) approach developed by Pesaran et al., (2001) and the Augmented Granger Causality approach given by Toda and Yamamoto (1995) are applied. To do that, we have used time-series data on economic growth, labor force, physical capital and four separate education indexes from 1990 to 2019. The data are collected from the World Development Indicators (WDI) and Human Development Reports (HDR). Furthermore, we used a global measure of education, called the education index, by adopting the UNDP methodology. The education index is a proxy for education development. The several indicators were used to demonstrate the robustness of the empirical results.   

Our results of the ARDL-bound test show that there exist cointegration between economic growth and education. The results also show that there is bidirectional causality between education and economic growth. All levels of education Granger cause economic growth, while economic growth causes all indicators of education except gross enrollment ratio, primary in all cases of causality analysis.

These findings suggest that the government should invest in gross primary enrollment to accelerate economic growth, which leads to further education and thus economic growth.

JEL Classification: C5 C22, I25, O4

Paper type: Empirical research