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Education expenditures and human capital: can austerity compromise growth in Portugal?

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  • Sofia Amaral
  • Marta Simões

Abstract

We estimate a trivariate VAR model with public expenditures on education, schooling levels and output and perform cointegration, causality and impulse response analysis for the period 1975-2008 to investigate whether the recent expansion of the Portuguese public education system fostered higher output levels highlighting human capital accumulation as the mechanism that connects the two variables. The data used in this study was retrieved from http://www.pordata.pt and the necessary calculations were done using the econometric package GRETL. The results indicate that a change in public expenditures on education has a positive effect on output in Portugal, supporting in this way education spending as an expansionary fiscal policy instrument that can alleviate the downturn in output in the short-term. The long-term role of education spending is however less clear since we were not able to find a long-run equilibrium relationship between our variables.

Suggested Citation

  • Sofia Amaral & Marta Simões, 2019. "Education expenditures and human capital: can austerity compromise growth in Portugal?," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 22(4), pages 696-715.
    • Handle: RePEc:ids:ijbglo:v:22:y:2019:i:4:p:696-715
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    Cited by:

    1. Ricardo Ferraz, 2022. "The Portuguese Military Expenditure from a Historical Perspective," Defence and Peace Economics, Taylor & Francis Journals, vol. 33(3), pages 347-365, April.

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