TITLE:
Institutional Governance, Education and Growth
AUTHORS:
Mohamed Bouzahzah, Simplice A. Asongu, Mohamed Jellal
KEYWORDS:
Institutions, Human Capital, Education, Growth
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.2,
March
31,
2016
ABSTRACT: This study articulates the interaction among institutional governance,
education and economic growth. Given the current pursuit of education policy
reforms and knowledge economy around the world, it is of policy relevance to
theoretically analyze the main mechanisms by which the macroeconomic impact of
education on growth (and economic development) occurs. Our theoretical model
demonstrates how incentives offered by the government affect human capital
accumulation which ultimately engenders positive economic development
externalities. We articulate two main channels through which education affects
economic growth. The first channel highlights direct positive effect of
educational quality on the incentive to accumulate human capital by individuals, which makes them more productive. The
second channel appears in the explicit function of the economic growth rate. As
a policy implication, we have shown that the growth rate depends on the rate of
return on human capital or that this rate of return itself depends on the
quality of governance, which further increases growth. As a result,
institutional quality has a double dividend, which suggests considerable
benefits to educational reforms.