An Empirical Study of Education Expenditure, Health Care Expenditure and Economic Growth in Malaysia using Granger Causality Approach

Abstract

Health and education has appeared to be essential factors that contribute in developing the human capital and enhancing the economic growth. Therefore, this paper will empirically analyze the impact of the education expenditure and health care expenditure towards economic growth in Malaysia by employing Pair Wise Granger Causality test. The trend of the public education expenditure and public health care spending time series data over the period of 1980 to 2012 was explored in this study. The empirical findings of the Granger Causality test revealed that there is unidirectional causality that runs from GDP to the public education expenditure. Similarly, a one-way causality was found running from GDP to the public health care spending. The findings of this study may be helpful for the policy-makers to amend the existing policies and budgetary allocation for the health care sector and education sector respectively.