Examining the Impact of Literacy Rate and Educational Expenditure on Economic Growth of Pakistan

Abstract

This study investigated the impact of Literacy Rate (LRt), Literacy Rate Male (LRMt), Literacy Rate Female (LRF_t) and Educational Expenditure (EE_t) on (GDPt) of Pakistan’s economy for the sample period 2003-04 to 2023-24. Augmented Dickey Fullert (ADF) Test found that tested dependent variable (i.e GDP) is termed as stationary at level I(0) only, whereas the rest of independent variables are termed as stationary after applying 1st differencing. Findings of Ordinary Least Square (OLS) and Auto-regressive distributed model revealed the positive and significant impact of Literacy Rate of Male upon economic growth of Pakistan. Bound test indicated long run association among variables in the model. The value of the Error Correction Value is worked out as -0.71 termed statistically significant revealing convergence status from short run dynamics towards long run adjustments in the model. Variance Inflation Factor (VIF) indicated absence of severe multicollinearity, Heteroscedasticity Test, Lagrange Multiplier (LM) Test, Normality Test, Granger Causality Test and Wald Test confirmed stability of model. The study conclude  that literacy rates male and female proportion and its educational expenditure witnessed significant influence on economic growth through reduction of poverty, efficient use of innovation and meaningful participation in the labour market. Educated community being skilled human asset of the economy would be instrumental for driving advance technology in competitive global economy for the promotion of economic growth.