An Empirical Study on the Dynamic Relationship between Higher Educational Investment and Economic Growth using VAR Model

Abstract

Previous research has studied the relationship between higher education and economic growth, but the results are mixed. This paper analysed higher educational investment and economic growth theoretically and studied the long-term dynamic relationship between them by using Johansen test, Granger causality test, impulse response function, variance decomposition and other empirical methods based on vector autoregressive model. The result indicates a long-term stable equilibrium relationship among higher educational fund investment, human capital investment and economic growth. Specifically, higher educational fund investment and human capital investment have a significant positive impact on economic growth. Both higher educational fund investment and human capital investment are Granger causes of economic growth. Fund input is Granger cause of human input. Therefore, fund input is a major and driving impetus for higher education to promote economic growth. Theoretical and practical implications are discussed. Copyright © 2014 John Wiley & Sons, Ltd.