Investigating the Causal Relationship between Education and Economic Growth in Zimbabwe

Abstract

This paper specifically investigates the causality between education and economic growth in Zimbabwe during the period 1980 to 2008. The empirical investigation has been carried out by Pairwise Granger Causality and Vector Autoregression (VAR) modelling using modern econometrics techniques of unit root test since macroeconomic time series data was used which is frequently non stationary. The findings confirmed that there is uni-directional causality between education and economic growth in the Zimbabwean economy running from education to economic growth as established by granger causality tests, variance decomposition and impulse response functions. Results suggest that investing in education is important for economic growth. The results also confirm a transmission mechanism that runs from education to economic growth via physical capital investment. This shows that a rise in human capital boosts the return on physical investment. The study recommends that the government and the private sector, through public-private partnerships, should concentrate on policies that will improve the education system.