Causal Relationship between Public and Private Education Expenditure and Thailand’s Gross Domestic Product
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Abstract
This paper examined the relationship between public and private education spending and Gross Domestic Product (GDP) of Thailand. Using time-series data from 2009 to 2024, the study employed cointegration and Granger causality tests to explore the linkages between sectoral educational expenditures and economic output. This is complemented by an Error Correction Model (ECM) to capture short-run dynamics and determine the speed of adjustment toward long-run equilibrium. The findings revealed a significant bidirectional relationship between private spending on education and GDP, suggesting that private spending on education stimulated the economic output, which in turn provided the resources for further private educational expenditure. The Autoregressive Distributed Lag (ARDL) cointegration results confirmed a stable long-run equilibrium among the variables, while the ECM indicated a significant, albeit moderate, speed of adjustment following economic shocks, reflecting the time lag inherent in educational investments. However, no significant causal relationship between public spending on education and GDP was found. This non-causal link is attributed to the inefficient allocation of the fiscal budget as a disproportionately large share of spending was consumed by administrative and personnel costs rather than quality-enhancing initiatives. Consequently, government educational expenditure must be redirected toward improving human capital. To leverage the positive impact of the private sector, the government should implement policies such as tax incentives or matching grants, while establishing clear regulatory frameworks to ensure educational quality, thereby stimulating economic output in the long run.
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