IMPACTS OF FINANCIAL DEVELOPMENT, ICT AND GOVERNMENT EXPENDITURE ON EDUCATION ON THE ECONOMIC GROWTH OF DEVELOPING COUNTRIES
Hui Shan LEE1, Shyue Chuan CHONG2, Bik Kai SIA3
1Faculty of Accountancy and Management, Universiti Tunku Abdul Rahman, Selangor, Malaysia firstname.lastname@example.org;
2Faculty of Accountancy and Management, Universiti Tunku Abdul Rahman, Selangor, Malaysia email@example.com;
3Faculty of Accountancy and Management, Universiti Tunku Abdul Rahman, Selangor, Malaysia firstname.lastname@example.org
Universal primary education is a major issue for developing countries because they do not have appropriate financial resources necessary to create a good quality of learning environment. Funds pledged by the international community are generally not sufficient enough to allow developing countries to establish an education system for all children. This article examined the impacts of financial development, information telecommunication and technologies (ICT) and government expenditure on education in 44 upper-middle-income countries from the year 1991 to 2016. By using a static panel regression model, it was observed that financial development and ICT imposed a positive and significant impact on economic growth. ICT postulated a non-linear (inverted U-shape) effect on growth, which indicated that at the initial stage ICT impeded growth but ICT stimulated growth at the later stage. Interestingly, government expenditure on education did not postulate a significant effect on growth but when government expenditure on education interacted with financial development, these interaction effects became significant and negative. In middle-income countries, even though financial development has achieved a certain minimum level, own financing for education is not sufficient to improve economic growth. The implication of this study showed that developing countries cannot depend solely on their own financing for education — there is also a need for more foreign aid.
Keywords: developing countries; financial development; ICT; government expenditure on education; interaction effect; non-linear effect
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