The Impact of Higher Education on Economic Growth in Ethiopia

Abstract

The main objective of this research was to investigate the impact of higher education on economic growth in Ethiopia (1974-2019). Many studies attempt to explore the impact of higher education on economic growth. However, this particular area of the impact of higher education on economic growth remains unclear and there are limitations in investigating on the area particularly in Ethiopia. The study adopted a time series retrospective research design to examine the impact of independent variables (government expenditure to higher education, employments opportunity, student enrollment, stock of human capital, and rate of research and development) to the dependent variable (Real GDP).Data were collected from World Bank, United Nations Conference on Trade and Development and National Bank of Ethiopia. The study employed ARDL and ECM models to evaluate the long run and short run relationship between variables respectively. The study findings indicate that government expenditure, stock of human capital, and higher education enrolment ratio have positively correlated with GDP and have significant contribution to the economic growth of the country in the long run. However in the short run, government expenditure, higher education enrolment, stock of human capital and employment rate have been found showing insignificant contribution to economic growth of the country. Among the variables government expenditure to higher education is found playing most significant contribution to the GDP. However in the short run government expenditure is insignificantly contributing to the economic growth. Other things remain constant; a one percent increase in government’s expenditure to higher education leads 1.567 Ethiopian Birr decrease in economic growth. Also in the long run employment opportunity is found insignificantly contributing to the growth of the economy. The gross employment rate is negatively influenced which is statically insignificant at 1 percent significant level Similarly research and development has little or no contribution to economic growth of the country in the short run and long run. Holding other things constant an increase in investment in higher education research and development, there is insignificant role that it plays for the GDP of the country.