Public spending on education and Economic Growth in Algeria: Causality Test

Abstract

In this article, we seek to study the relationship between education and economic growth.For this purpose, we studied multipleentrances(dimension ) information relating education and Economic Growth on theoretical and empirical background in the first, as the second part of study to analysis and examine the effect of Public spendingon education on economic growth in Algeria over the period 1974-2012. with the use of endogenous growth model. In this model, gross domestic product(GDP) is based on the Cobb Douglas form which is the function was adoptedwith five variables: Real Gross National Product (GDP), Capital (K), Labor (L), Expenditure on Education (SEDU). Two unit root tests (Philips-Perron Test) have been employed to test the integration order of the variables.study uses Ordinary Least Squares (OLS) and Johansen Co-integration test and Causality Test is as analytical techniques for this purpose. The empirical results support the main hypothesis of this study that Public spending on education affects positively economic growth in Algeria. Even though that the most important effect on economic growth is for education, the other three explanatory variables affect also, positively, the economic growth; yet their effect is relatively less important than the effect of education.

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