Role of Education in Economic Growth of Pakistan: A Sectoral Analysis

Education and economic growth nexus is one of the abundantly researched topics in economics. The social returns of education in addition to its private returns makes it public good and justifies the use of public funds. While most of the studies conclude the positive relationship between the two, examples also exist of the negative relationship. However, there is a gap in the literature to find and compare the effect of education on the growth of agriculture, industry and services sector separately. This paper is particularly aimed to analyze the impact of different levels of education of employed persons on level and growth of national output, agriculture, industry & services sector output in Pakistan. The method of analysis is the autoregressive distributed lag model (ARDL). Each level of education is found to have a positive effect on the output per employed person both in the short-run and long-run except for agriculture sector. In the agriculture sector, each education level is negatively associated. The deeper analysis showed that the greater negative effect of employment evades the positive effect of education in the agriculture sector. The comparison of different sectors shows that primary education contributes more to the industrial sector. While the contribution of the secondary & tertiary education is highest in the services sector.