Education-Economic Growth Paradox in Nigeria : An Autoregressive Model

The paper sets out to empirically investigate the paradox that an increase in real educational expenditure reduces economic growth in Nigeria, using annual time series data from 1970 to 2003. Some statistical tools are employed to explore the relationship between these variables. The study examines stochastic characteristics of each time series by testing their stationarity using Augmented Dickey Fuller (ADF) and Phillip Perron (PP) tests. Then, the relationship between growth rate of real gross domestic product and real capital expenditure on education is dynamically examined using error correction mechanism and the effects of stochastic shocks of each of the endogenous variables are explored, using Vector Autoregressive (VAR) model. With all the statistical tools employed, the findings reveal that the impact of real capital educational expenditure on economic growth is consistently negative in Nigeria, which is a paradox. The paper concludes that the trend can be reversed by adopting a feasible approach to quality education through alternative incentive schemes. These include new contracts and approaches to teacher compensation, introduction of parental choice across schools and merit awards to teachers, which should be directly linked to objectives information about students' performance