Exploit the Relationship between Education and Economic Growth

Tan, Xin Yi (2025) Exploit the Relationship between Education and Economic Growth. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

This research aims to explore the relationship between education and economic growth in Malaysia by examining the short-run and long-run dynamics, as well as causal relationships among education enrollment, foreign direct investment, unemployment rate, and economic growth. Utilizing annual time series data from 1991 to 2022, we analyze Gross Domestic Product per capita (LGDP) as the dependent variable, with education enrollment (LEDU), foreign direct investment (LFDI), and unemployment rate (LUR) as independent variables. We employ the Augmented Dickey-Fuller (ADF) and Phillips-Perron tests for unit root assessment, followed by the Johansen cointegration test to explore cointegration relationships. Additionally, the Vector Error Correction Model (VECM) and Granger causality test are applied to scrutinize the interconnections in both the short and long run. The findings suggest that education enrollment, foreign direct investment, and the unemployment rate are negatively associated with long-term economic growth, indicating a misalignment in Malaysia's economic conditions.