Modeling the impact of education on the economic growth: Evidence from aggregated and disaggregated time series data of Pakistan

Motivated by the recent studies on the endogenous growth theories, which suggest that the economic growth driven by human capital accumulated by education has potential to be substantial and more sustainable, this article evaluates the level and growth effects of education on the economic growth of Pakistan over the period of 1960 to 2010. Non-linear two stage least square instrumental variable (NLTSLS-IV) estimators have been used for estimating the error correction model. Our estimated production function clearly indicates that there is a positive effect of different levels of education on the economic growth of Pakistan. Therefore, we find support for the hypothesis that the investments in education sector may raise the economic growth of the country. (C) 2012 Elsevier B.V. All rights reserved.