Is Education an Investment for the Future? The Impact of the Greek case on Economic Growth-Juniper Publishers

 Annals of Social Sciences & Management Studies-Juniper Publishers


Introduction

The interest for the economic benefits of education is dated back in the era of industrial revolution, and the times when Adam Smith in 1776 suggested educating the workers. Education, he said, drives away all the disarray and discontent. Generates a self-interest in the person and thus improves its levels of productivity. After a very long period, education is again a key factor for production, development and growth. Theodore Shultz (1963) with his work on human capital and the economic value of education, the focus of Gary Becker [1] on the critical role of education on human capital formation, and the seminal work of Jacob Mincer [2] and his earnings regressions made a restart to the issue of economics of education and the creation of human capital as a major research field. Recent literature though proves that, the assumptions of Mincer model for the 1960 labor market are no longer strong and for that reason the model is not able to grasp the current conditions. Mincer’s belief that markets operated under perfect certainty, and that individuals were facing no direct costs other than their time (a free good), misled him and the method was biased.

Most instrumental variables also, tend to correlate with individual cognitive abilities, violating the fundamental hypothesis of freedom e.g. family background correlating with IQ measurement not illustrating the real ability of the person under examination, with maybe the only exception that of the measurement of local labor market unemployment, which reflects purely e.g. the unemployment of the educated due to a clear mismatch with the low skills in demand. Available data sets of education and earnings do not include separate measurements of the cognitive ability of individuals, in which case it is included in the residuals, implying not accurate results. All studies have approached the contribution of educational expenditure to growth very sufficiently but none of them has ever managed to quantify other individual characteristics that refer to the family, such as particular features of the person etc.

Even fewer are the studies that are directed towards the social and economic structure of an economy and its comparative advantage. Asteriou & Siriopoulos [3] in a study on Greece they studied the Greek educational system and found that emphasis is needed on vocational higher education for the 1960-1994 period. A consecutive study on the causal effect of education on economic growth [4,5] in Greece for the 1960-2015 period showed a rather weak causality on the country’s gross domestic product implying the need for a comprehensive educational reform in terms of curriculum and funds, adding to the finding that vocational education should be outlined.

In a whole, the literature on the relation of years of schooling and growth is positive. But the average level of years of schooling as a variable might be both misleading and inadequate, in international as well as in national level, when used in the comparative study of human capital among countries. Also, another important issue is the unobserved heterogeneity on a national level meaning that e.g. the cultural values of a country that will be missing from the econometric model, will in the end result in inaccurate findings derived from the education production function. As very often is the case, one year of school attendance in Europe happens to be in many respects different from one year in Asia, or between countries for example. The comprehension of the way individual agents decide on the way they will distribute their wealth upon the cultivation of themselves and their families is something that remains vague.

Discussion

In the process of looking for economic meaningful causal relations Linear and Nonlinear Granger causality tests were applied. Except for the classic Engle-Granger test, Diiks and Panchenko non-parametric methodology for both unidirectional (asymptotic) and bidirectional (bootstrapped) causality was adopted. Johansen Cointegration testing gives us the existence of of cointegrating vectors (Trace statistic) justifying the equilibrium relationship that exists between them. It indicates the existence of 4 cointegrating vectors, which is the signal that allows us to continue further with the analysis. The fact that the random walk of our variables, is relatively not that random at all, is immediately translated as a very close relationship at hand (Table 1).

Max-eigen statistic indicates one cointegrating relationship, which again confirms our hypothesis, and allows to go further with the procedure of causality testing. We examined the dynamic relationship between GDP per capita, public expenditures in education and students’ enrollments of all 4 levels namely preschool, primary, secondary and tertiary education for Greece in the 1960-2015 period. Compared to the results of the Asteriou & Siriopoulos [3] study causality now appears to be weak especially for the case of Higher education (Table 2-5).






Until today Greece has been following a rather moderate rate in education expenditures as of 1960 and on (Figure 1). Part of this is attributed to European directive of education funding of the EU-average of 5% (Figure 2) which has been followed by almost every European country [6,7].




In terms of current prices and when compared with other European countries to the number of school entrants especially for Higher education it does not go according to the raw numbers (Figure3). For a number of 600.000 HE students Greece has been spending a 4.4 % of its GDP , when at the same time France with 1.000.000 students spends 10 times as much in million euros (Figure 4) and the Netherlands with almost the same number of students spends at least 4 times more but all three countries follow the equivalent of 5% of GDP [8,9].


Conclusion

In the era of knowledge economy, interest in education must be of greater importance. Students pursuing further with their studies can provide the pedestal for a stronger economy and a better skilled labour force. Human capital is and will continue to be a driving force for businesses. The education system in Greece needs to adopt a more comprehensive investment policy in order to reply to a great number of individual agents who believe in augmenting their utility through schooling.


https://juniperpublishers.com/asm/ASM.MS.ID.555622.php

For More Articles in Annals of Social Sciences & Management studies Please Click on: https://juniperpublishers.com/asm/index.php

For More Open Access Journals In Juniper Publishers Please Click  on: https://juniperpublishers.com/index.php

Comments

Post a Comment

Popular posts from this blog

Towards an Improved Bio-Resource Management System-Juniper Publishers

Image
   Annals of Social Sciences & Management Studies-Juniper Publishers Opinion Bio-resource management is an issue that concerns sustainability of the global commons that humans depend on. This sustainability is sought to be ensured through reduction of environmental stressors that are generated through unplanned, unintended activities of humankind. Earth’s interlocked web of life is stressed through degradation in biotic (living environment including all organisms) and pollution in abiotic (physical environment like space, temperature, soil, air and precipitation) factors. These factors are involved in the production and consumption processes of energy and nutrient use in agriculture, industry and human services. Generally, there is a constant tussle between private and public use of bio-resources. There is difference of opinions over primacy of utilitarian economic imperatives of ‘wise-use’ of the environment by the agri-business and industrial sectors and the political-ethical imp
Read more

Advanced Technologies and Human Resource Management-Juniper Publishers

Image
A nnals of Social Sciences & Management Studies-Juniper Publishers Introduction For a time, human resource management was almost firmly an administrative function, with the professionals focusing their attention on completing repetitive tasks and serving as personal consultants to employees. Until 1970s most of the Personnel departments were considered as a place which hire people and keep personnel tracking. Through those records, the companies were able to get information on newly hired employees to the organization, fired, promoted and transferred while producing reports on present and to some extent on the past. There is no depreciation of importance and effect of the human resources management at all. Recently, management of human resources and its needs are becoming the center of the attention of each individual employer in every organization. The orientation of company on human resources starts to be one of the key tasks of a strategic management and human resources play an
Read more

On Faith or Belief-Juniper Publishers

Image
   Annals of Social Sciences & Management Studies-Juniper Publishers Introduction At the celebration of the 40th anniversary of China’s reform and opening in December 18, 2018, President Xi Jinping said, “Faith, conviction, and confidence are vital at all times. Small to one person, one collective, big to a political party, a nation, a country, as long as there is faith, conviction, confidence, it will become more and more courageous and brave, otherwise it will be defeated and self-destructed” [1]. But when I asked the graduate students who came to me for an interview the question what your faith or belief is, most people usually answered me that “I don’t have a faith”. Faith and conviction are the contents taught in the philosophy curriculum. From this phenomenon, at least two problems can be revealed. First, the philosophy taught at school and university was not accepted by them and did not become their faith or belief. Second, they might think that philosophy is useless, so the
Read more