The Level-Specific Effects of Education on Economic Growth: Evidence from Four Caribbean Countries

The supply of human capital in the economy's production activities is a function of the quality and volume of education services provided at the secondary and tertiary levels in the education system. Hence, the allocation of resources by government to education is an important determinant of human capital formation. Depending on its level-specific variations, a given amount of human capital accumulation can have differential impacts across sectors and on economic growth. This study posits that government spending on education can be identified as an important indicator of human capital formation that propels economic growth and confirms that for the countries considered, there are level-specific effects of human capital on output in the manufacturing and service sectors, and ultimately on aggregate output. Given this information, policy makers can therefore consider opportunities for enhanced budgetary allocations aimed at building capital that has a positive impact on economic growth.