Impact on Education on Economic Growth in Malaysia

Yap, Chieng Yao (2024) Impact on Education on Economic Growth in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

This paper attempts to investigate the determinants of economic growth in Malaysia. The objective of this study is to examine the long run and short run relationship between various levels of education (primary, secondary, and tertiary) with Malaysia’s economic growth by employing annual data over the period of 1979 to 2020. By investigating the relationship between education and economic growth in Malaysia, this study used Gross Domestic Product (GDP) per capita as the dependent variable. There are a few independent variables that were used in this study, which are the different levels of school enrolment, namely primary, secondary, and tertiary as well as the Gross Fixed Capital Formation. The Autoregressive Distributed Lag (ADRL) and Error Correction Model (ECM) was used in this study to examine both the short-term and long-term impacts of education levels on education growth, covering a period of 41 years. According to our studies, primary school enrolment (PRI) and Gross Fixed Capital Formation (GFCF) shown a direct and statistically significant connection with economic growth in the long run. Whereas, secondary (SEC) and tertiary school enrolment (TER) have a positive but statistically insignificant correlation in the long run economic growth. Furthermore, in the short run, primary (PRI) is significant and negatively correlated with Malaysia’s economic growth while secondary school enrolment is both positively and negatively correlated on economic growth. However, tertiary school enrolment (TER) shown an insignificant and negative impact on economic growth in the short-run. In addition, Gross Fixed Capital Formation (GFCF) shown a significant influence on economic growth in both the short and long run. This finding underscores the importance of investment in physical capital and infrastructure for sustained economic development in Malaysia. Based on the findings, the Malaysian government should implement policies to improving access, quality, and relevance of primary education, while also advocating for compulsory education at both lower and upper secondary levels. Besides, for tertiary education, the focus should be on curriculum reforms, equitable access, and incentivizing academic achievement through financial assistance schemes. Additionally, promoting lifelong learning, internationalization, and public-private partnerships can further enrich the tertiary education landscape and contribute to sustainable economic development.