This document discusses the relationship between education and economic growth. It argues that education contributes to economic prosperity and development by stimulating human potential and acting as an essential component of the development process. When educational planning and resources are utilized efficiently, it can lead to growth. The document outlines how education promotes economic growth through investment in human capital and developing skilled manpower. It also examines how education systems have contributed differently to economic development in countries at varying levels of development.

1. Education and Economic Growth
Thesis Statement
It is accepted that education, in addition to its primary role in stimulating and liberating as well
as promoting actualization of human potential, also contributes to the prosperity and economic
growth of a society. Moreover, education is considered an essential component for the
development process. Accordingly, a proper educational planning and efficient utilization of the
resources devoted to education can manifest itself in growth producing capacity.
Outline:
I. Education
A. Introduction
B. Planning
i. Initial conception
ii. Cultural and social dimension
iii. Financial aspects
II. Education and Economic Growth
A. The Dimension of Growth
B. Sources of Economic Growth
III. Contribution of Education to Economic
A. Investment in Education
B. Education and Manpower
IV. Education and Economic Development
i. Developed countries
ii. Developing countries

2. Education and Economic Growth
Introduction
Since the end of the World War  there have been few subjects which have received as much
as attention from social scientists, policy makers and politician as that of national development.
The need to rebuild Europe, along with simultaneous emergence of the new nations of Africa
and the growth of the old nations in Latin America and south East Asia has brought into recent
focus the importance of factors necessary for social and economic development. The
theoretical debate and policy decisions concerning development have varied considerably, have
sometimes stressed technological advancement, but at other times have focused on social
wellbeing. However, through these years a key variable in these discussion and practices has
been the role that education plays in the development process.
Development as a concept in social and economic thoughts has been as ambiguous as no other
term. The term has been used in a variety on contexts, often clouded with political and
ideological overtones. There are many words with similar meaning to that of development; for
examples, social change, growth, evolution, progress, advancement and modernization. With
the exception of the term social change, all other imply change in specific direction, which is
regarded by the users as positive and highly valued.
There have been attempts to resolve this ambiguity in the concept of development. Fletcher
(1976) argues, for example, that there is value-free meaning contained in the notion of
development over and above the ideological and political uses of the concept. In discussing this
meaning he argues that development is an actualization of an implicit potentiality.
This implicit logic of development about which Fletcher speaks of is particularly appropriate in
understanding and planning for change in human societies. It is based on the assumption that
both societies and individuals have innate biological, psychological and sociological capacities,
which can be evaluated, in terms of their level of actualization. For example, individuals can be
physically healthy or sick or not participating in their social environment. Likewise, societies can
be judged as efficient or inefficient in making possible the actualization of their human

3. potential. Following Fletcher’s notion of development, we can argue that any change which
promotes or actualize these dimensions of society represents development and we can further
contend that education in the formal sense is an essential component for the development
process.
Modernization theory, as we know today, emerged in the 1950s and to some extent it was an
intellectual response to the two world wars and represent an attempt to take an optimistic
view about the future of mankind, according to Huntington, the process of modernization can
be characterized as revolutionary ( a dramatic shift from tradition to modern), complex (
multiple causes), systematic, global ( affecting all societies), phased ( advanced through stages),
homogenizing ( convergence), irreversible and progressive. While modernization theory
dominated the thinking and research of sociologists, the economists also formulated their own
theory of development based upon structural function notions.
Modernization theory was mainly a social psychological theory focusing upon individual values
and attitudes. The economists, however, focused upon the productive capacity of human
manpower in the development process and in so doing treated the improvement of human
workforce as a form of capital investment. Thus the human capital theory postulates that the
most efficient path to the national development of any society lies in the improvement of its
population. As with modernization theory, human capital theory provided a basic justification
for large public expenditure on education both in developed and developing nations. Its appeal
is based upon the presumed economic return of investment in education both at the micro and
macro levels. Investment in human capital results in rapid economic growth for society and also
provides returns in the form of individual economic success and achievement.
Planning in Education
Initial conception
Education planning as it is known today is still too young and growing rapidly and is a far too
complex and diversified subject to be encased in any hard and fast definition, good for all time.
However, educational planning, in its broadest generic sense, is the application of national,

4. systematic analysis to the process of educational development with the aim of making
education more effective and efficient in responding to the needs and goals of its students and
society. Seen in this light, education planning is sufficiently flexible and adaptable to fit
situations, which differ widely in ideology, levels of development and governmental form.
In the developing nations
In the past two decades comprehensive educational planning took shape and became widely
accepted as being vital to the orderly and efficient development of education. UNESCO
declared education planning as one of its top priority fields of activity, developing its programs
mainly through ministers’ conferences and technical meetings, by supplying educational
planning experts to more than eighty of the developing countries, and by establishing regional
and international training and research centers.
In this same period the whole world participated in a spectacular educational explosion. In
many countries – rich and poor – enrollment doubled; educational expenditure rose sharply
while multilateral assistance and on a more massive scale, bilateral aide played a substantial
role in support of educational projects; supply of classrooms, laboratories, books and other
educational media grew considerably; the educational profile and potential productivity of the
labour force improved; education became accepted as an essential sector for over-all national
development.
Starting in 1950s the developing nations responded similarly to their circumstances, with an
educational strategy of linear expansion. At a series of UNESCO conferences early in the 1960s
education ministers of Asia, Africa and Latin America set ambitious regional targets for
educational expansion in their respective regions, to be achieved by 1980 ( 1975 in case of Latin
America). These targets called for 100 percent participation in the secondary and high
education.
In the majority of the African countries planning authorities are units or bodies attached to the
national ministers of education in the respective country, with provincial annexes or delegates
for education. A few of the African countries have no administrative unit for educational

5. planning; instead the plan is prepared and discussed by standing commissions. The planning
unit or commission is officially responsible for the assessment and revising of the plan. The
degree of the expertise and qualifications of the staff varies considerably among the African
countries. Some have qualified educational specialists. In many cases, however, staffs who have
no specialized training nevertheless have adequate general university training in education,
economics or statistics. In numerous cases those in charge of the planning have received no
appropriate educational training. The classical decision theory which assumes rationality and
optimization of strategy by seeking the best possible alternatives is not an applicable feature in
most planning units in most African countries. In practice, the politicians have the last word in
selection of the alternative strategies. Satisfactory alternatives rather than optimal ones is the
common practice.
Cultural and social dimension
As the African countries formerly under colonial rule have gained independence, their national
government have either inherited or started to establish their administrative bureaucracies and
educational systems synonymous to their former colonists, which have never recognized the
great ethnic, linguistic and social diversity of the colonized nations of Africa. Africa is separated
by the Sahara Desert into two parts; this sea of and set the northern lands of Africa from hose
to its south and so caused throughout the history great ethnic, economic, social and political
difference between the two. The countries north of the Sahara, bounded the Mediterranean
and Atlantic, have shared histories from ancient times with the Mediterranean civilization and
cultures with closer affinities to the counties of Europe. They also have ties with the ethnic,
political, religious Muslim entity of the Middle East.
Sub-Sahara Africa and its offshore islands cannot be considered a homogeneous whole about
which generalizations can be made. Ethnically it is such as diverse, although the major ethnic
groups is put as low as eight by most authorities. Over one thousand languages are spoken.
Linguistically the whole region is most complex. Despite attempts by the African countries to
devise and adapt educational system that comprises this cultural diversity, these attempts were
not always successful, due to not only technical, practical and financial constraints but also to

6. political implications. However, the use of African languages is still confined to some countries
and only in the first years of primary school. Moreover, belief system in many rural areas in
Africa sometimes constitutes a strong resistance to an educational plan, which has
predominantly secular aims. The resistance from illiterate religious traditions sometimes may
have local rather than national effects as compared to the Islamic African nation where Islam
may dominate the educational system as a whole. Social-class differences tend to have less
impact on access, survival and outcomes of secondary and high education in the African
countries. According to Stephen Heyneman (1977), the overall explanation for weaker
dependence on home background in many developing countries has to do with the degree of
social “Crystallization”. He states that “the step from peasant illiteracy to post-primary formal
education is easier to take in society where social and educational prerogative have not been
handed down over several generations, as has been the case in Europe since the early 19th
century”. Nevertheless, in some countries children of manual workers tend to be better
represented than those of the farmers and peasants, which can be interpreted as a reflection of
early stages of urbanization and modern-sector employment. The African states in sixth
conference of ministers of education and those responsible for economic planning, organized
by UNESCO in Dakar in 1991, adopted several objectives and strategies that can be summarized
into;
1. The need to spell out the quantitative and qualitative objectives capable of being
achieved by the year 200, given the limited volume of resources.
2. Reducing illiteracy by half compared with its 1990 level (from 52 to 26 percent), with
close attention to be given to literacy training for girls and women.
3. Developing educational facilities to improve the quality of basic education
4. Improving teaching and learning conditions, infrastructure, and methods and teaching
aide.
5. Integrating educational goals into economic development goals
6. The strengthening the institutional planning and management capabilities, the abolition
of free-paying in public education and re-allocation of resources within the educational
system.

7. 7. Using African languages to promote basic education not only in the first year of primary
school but also extending it without limit right up to the highest level of education
Financial aspects
Financing education policies and arrangements in most African countries are designed to
foster equity in education opportunities and promote regional economic development. The
costs of education vary greatly from one country to another. However, education budget as
a percentage of total public expenditure is as follows:
Table 1
Region 1962 1963 1964 1965 1966
Africa 14.51 14.71 14.39 14.76 14.98
Europe/ North America 13 14.45 15 15 15.23
Percentage of public expenditure on education given to investment is as follows:
Table 2
Region 1962 1963 1964 1965 1966
Africa 1.18 3.69 4.7 4.2 5.14
Europe/ North America 11.83 14.02 15.48 14.86 15.17
In general, public national resources and external assistance stemming from bilateral or
multilateral aide are the main sources of financing public and higher education. Bilateral
aide derive from governments, private foundations or universities, the other sources of
financial aside for different educational purposes to African countries are UNESOC, The
World Bank and the Regional Development Bank.
Education and Economic Growth
The dimension of growth

8. Economic growth is the increase in some measure of the economy over time. It can be
specified in term of the change in any of the national any of the national income concepts.,
but GNP, the total of all final goods and services produced in a year, is mostly commonly
used. But, a number of factors exist that would appear to create a serious underestimate of
economic growth as measured by GNP. First, quality changes in products and home
production are not reflected in the GNP. Second, GNP does not provide measure for the
overall well being of society.
Sources of growth
There are three factors that could account for a situation in which a positive growth may
take place. One of these situations involves the three input categories: Labor input (L),
capital input (K) and land input (A). If we designate the aggregate national product by Y, a
growth in production could then be represented by:
Y = f (K, L) (1)
Growth in production could then be represented by:
AY = f (AK, AL) (2)
Since the change in anything divided by its original amount is by definition its rate of
growth; (2) can be transformed into:
AY = f AK, AL = GY = F (GK, GL) (3)
K L
Where G is a symbol representing the growth rate
Therefore, the growth output in this model (neoclassical) is dependent on capital
investment, which encompasses improvement in technology (disembodied) and the growth
of the labor. The growth of the labor is net result in several elements. First is the rate of
population increase and the investment on labour through training (embodied).
Contribution of Education Economic growth

9. Education is one of the many elements, which influence economic growth, and it does so in
several ways. The first route by which education affect development is in providing people
with specific skills and knowledge useful in the productive process and increasing the
capacity of those individuals possessing them as well. Second, education provides general
knowledge and methods of problem solving that the individuals can apply to the work in
which she/he engaged in. knowledge and problem-solving are two factors that can
contribute to the most important aspects of economic growth-innovation, adaptation and
entrepreneurship. Third, education can contribute to development by providing or
developing attitudes amicable to production. Schooling, by its structure is a process that
develops attitudes conducive to the modern work rhythm. Fourth, education serves
development by providing a screening system that assures that the most able individuals
are selected in the most economic fashion. Finally, through scientific research is conducive
to the efficient use of scarce natural resources.
Investment in education
The use of investment theory in educational decision making is one of the most extensively
researched areas in the field of the economics of education. Although most of the empirical
research in this area has been conducted since 1950s, studies quantifying the return to an
investment in education appeared as early as 1935. The most widely known studies in the
area of educational investment are the macro ones analyzing the aggregate return to an
educational investment on a national or regional level. Education has attribute that qualify
its inclusion into both consumption and investment categories. Acquiring education through
schooling and or/training increases one’s ability to earn more and hence consume more in
the future. In most of the developing countries (including African counties) investment in
education takes the form of human capital or manpower approach.
Education and manpower
It was in the later 1950s and early 1960s that economists such as Theodore Schultz and
Frederic Harbison argued that human capital was more important than material capital (see
Schultz (1961), Harbison (1962). People acquired skills and education by investing time and

10. money in pursuing formal education. It was acquisition of human capital, which explained
the higher labor productivity enjoyed the developed countries. Attempts which were made
to apportion the growth of income to various contributing factors showed that for the U.S.
economy between 1920 and 1957, 23 percent of the total growth in per capita income was
due to increased education and 20 percent due to the growth in technological knowledge
(Denison (1962)). Thus, human capital, in the form of educated labor force and
technological knowhow, was found to be more important than material capital which
contributed only 15 percent of the total growth.
The notion of human capital was further broadened later by Schultz when he defined the
categories of human capital to include health facilities and services, on the job training,
formal education, study program for adults and migration of individuals and families to
adjust to the changing in job opportunities.
In Africa, and in most developing countries, the notion of human capital is interpreted in the
planning strategies in term of investment in education – human capital. Even within this
restricted interpretation, it was formal schooling at the various levels – primary – secondary
and tertiary – that became the focus of attention. Subsequently, massive expansion
exclusively in formal was not conducive to economic growth and productivity, as it had
been the developed countries. According to Frederic Harbison, the major human resources
or manpower problems in the developing countries are the high rate of population growth,
the wide spread of unemployment in agriculture and modern sector, scant supply of the
persons with the critical skills and knowledge required for effective national development,
inadequate institutions for mobilizing human effort and the lack of incentives.
Education and economic development
International comparison
Economic development is multivariate concept. In addition to referring to total income, it
also includes notions of productive capacity, infrastructure, income distribution, health etc.
most studies employ gross national product as annual rate of growth and per capita as the

11. best available measure of economic progress. Education as an accelerator in economic
growth is a question economists have tried to contribute to its answer in a variety of ways.
Schultz and his co-workers (1961) have calculated that in the United States “expenditure on
education have increased over 100 times from 1900 to 1956 on high school education” and
since gross national income was also increasing many times over the same period, it seem
reasonable to argue that at least some of this increase must attributable to increased skills
in the labor force, making education a productive investment rather than simply a
consumption item.
Denison and Correa (1964) have attempted to determine what shares of the increase in the
gross national product in U.S can be attributed to the usual types of capital formation,
arguing the large increase left unaccounted for in this way can be attributed to the
improvement on human resources. The trouble with such a residual approach is that any
factors or variables other than human capital can be attributed to the increase in GNP.
Direct return to education is another approach used by many researchers to determine the
economic consequences of education both in term of personal profit orientation and the
national productivity orientation.
Siphambe (1999) studied the private rates of return to education in Botswana and finds that
rate of return rises by the level of education. They are highest for upper secondary
education, and lowest for primary education. Higher secondary education has higher
private rates of return than lower secondary.
Harbison and Mayers (1966) reported that there is a sizable correlation between human
resources development and the GNP. For example, they find correlation among 75 nations
between GNP per capita and primary school enrollment of .67, between GNP per capita and
secondary school enrollment of .82, and between GNP per capita and third level enrollment
of .74. Curle reports a similar correlation (r =.64) between per capita income and post
primary enrollment. However, primary enrollment seems less likely to be important for
economic growth for a variety of reasons. On the other hand, correlation of economic levels
with primary school enrollment ratios is lower than with the secondary enrollment ratios.

12. On the other hand, primary school attendance has a doubtful relationship to significant
improvement in the labor force or even to literacy itself.
McClelland (1961) studied the effect of education “ secondary school enrollment figures” on
the rate of economic growth within 28 countries classified according to their economic level
using electricity consumption as a rate of economic development (see table3). A country is
classed as more or less educated depending on whether it is above or below the median in
years of secondary schooling per 1,000 inhabitants within a group of countries roughly at
the same economic level.
The finding of the study reveal strong highly significant relationship, the better educated
countries in 1950 (those above the median in education for their economic level) develop
faster in 1952 – 1958 period at nearly every level. Ten or 71 percent of the relatively better
educated countries developed at an above average rate, as compared with the three or 21
percent of the relatively less educated countries ( X = 7.03, P< 01). The relationship in term
of absorptive capacity or need of the economies at various levels of development reveals
that the need for highly educated people is much less than for highly industrialized
countries like US or Sweden. Nevertheless, within each level of development, the better
educated countries tended to develop faster subsequently.
Tables 3
Countries Classified by Economic Level (1929)
and Secondary School Enrollment (1930)
and by Rate of Economic Growth
ECONOMIC LEVEL SECONDARY SCHOOL ENROLLMENT ECONOMIC GROWTH
ELECTRICTY PRODUCED, 1929 PER 1,000 INHABITANTS 1929 RATE, 1929
KWh/cap˃800
U.S 44.3 +1.86
Canada 31.8 +1.73
Sweden 18.8 +3.17
Norway 18.7 - 0.3
KWh/cap˃500
England 50.2 +1.65

13. Denmark 40.5 +1.4
Netherlands 32.2 - 1.0
Australia 26.2 + 1.13
New Zealand 21.4 + 1.86
Japan 15.7 - .44
Finland 14.0 + .74
Austria 13.8 - .12
France 10.3 - .55
Chile 10.0 - .43
Italy 6.8 - .62
KWh/cap˃150
Ireland 12.4 +.33
Hungary 6.5 -.26
Poland 5.1 +.03
Argentina 4.9 -.61
Spain 4.4 -.63
Portugal 4.3 -.52
The development of education in much of Africa is taking place with a difficult context of
poverty, internal civil conflicts, internal displacement, political instability, low productivity
and high unemployment and population growth. In recent years, the challenge of
globalization and the consequent intensification of international competition, as well as the
rising prominence of science and technology, all have combined to pose significant
challenges.
Limited and unequal access to educational opportunities is leaving over 50 million children
not able to attend primary school, poor education quality and poor management and
planning capacity are other constraints. The African educational system is dependent on
scarce government resources with relatively little attention paid to mobilization of funds
from other sources. This further aggravated by enormous debts which most African
countries are servicing (see tabel4).

14. Table 4
African: Short and Long Term External Debts and Debts Service (in billions of US$)
1985 – 1990
1985 1986 1987 1988 1989
Total External Debt 176.3 203.4 239.9 243.1 249.6
Short Term 21.9 23.7 21.5 23.4 26.6
Long Term 6.8 6.8 7.4 7.9 8.3
To official creditors 89.7 110.9 137.6 140.3 147.4
To financial institutions 19.1 21.0 26.0 25.9 25.0
To other private sectors 29.5 31.7 37.3 36.9 34.4
The World Bank, however, is optimistic about the opportunities that can be utilized to
facilitate the development of education in Africa. The bank proposes that involvement of
the private sector in education, promotion of macroeconomic and sectoral policies and
continued commitment of the international community to human resources development
in Africa.