Is Education an Investment for the Future? The Impact of the Greek case on Economic Growth
Costas Siriopoulos1* and Sophia Kassapi2
1 College of Business, Zayed University, UAE
2Institution for Preschool Education, Greece
Submission: June 21, 2019; Published: July 17, 2019
*Corresponding author: Costas Siriopoulos, School of Business, Zayed University, UAE
How to cite this article: Siriopoulos C, Kassapi S. Is Education an Investment for the Future? The Impact of the Greek case on Economic Growth. Ann
Soc Sci Manage Stud. 2019; 3(5): 555622. DOI: 10.19080/ASM.2019.03.555622
In this paper, we study the long-run causal effect of public investments in schooling for the country of Greece by applying econometric techniques in order to investigate if there is an economically significant long-run relationship between school entrants at all levels and economic growth . Following the EU policy advice for Greece our study attempts to support the reform process of the education system as suggested, highlight those signals of ineffective investments and focus the attention of the investment policy in education on the needs of the knowledge economy, in order to guarantee the profitability of the financing funds. In an international and extremely demanding and dynamic framework, and in the European system of education and training in whole Greece is an important stakeholder that demonstrates a major embedded interest in higher academic studies and should be looked upon as such. Finally, we cast doubt on the notion that a strict financial adjustment program can induce sustainable development and boost economic growth.
Keywords: Returns to Education; Economic Growth; Sustainable Development; Government Expenditures
The interest for the economic benefits of education is dated back in the era of industrial revolution, and the times when Adam Smith in 1776 suggested educating the workers. Education, he said, drives away all the disarray and discontent. Generates a self-interest in the person and thus improves its levels of productivity. After a very long period, education is again a key factor for production, development and growth. Theodore Shultz (1963) with his work on human capital and the economic value of education, the focus of Gary Becker  on the critical role of education on human capital formation, and the seminal work of Jacob Mincer  and his earnings regressions made a restart to the issue of economics of education and the creation of human capital as a major research field. Recent literature though proves that, the assumptions of Mincer model for the 1960 labor market are no longer strong and for that reason the model is not able to grasp the current conditions. Mincer’s belief that markets operated under perfect certainty, and that individuals were facing no direct costs other than their time (a free good), misled him and the method was biased.
Most instrumental variables also, tend to correlate with individual cognitive abilities, violating the fundamental hypothesis of freedom e.g. family background correlating with IQ measurement not illustrating the real ability of the person under examination, with maybe the only exception that of the
measurement of local labor market unemployment, which reflects purely e.g. the unemployment of the educated due to a clear mismatch with the low skills in demand. Available data sets of education and earnings do not include separate measurements of the cognitive ability of individuals, in which case it is included in the residuals, implying not accurate results. All studies have approached the contribution of educational expenditure to growth very sufficiently but none of them has ever managed to quantify other individual characteristics that refer to the family, such as particular features of the person etc.
Even fewer are the studies that are directed towards the social and economic structure of an economy and its comparative advantage. Asteriou & Siriopoulos  in a study on Greece they studied the Greek educational system and found that emphasis is needed on vocational higher education for the 1960-1994 period.
A consecutive study on the causal effect of education on economic
growth [4,5] in Greece for the 1960-2015 period showed a rather
weak causality on the country’s gross domestic product implying
the need for a comprehensive educational reform in terms of
curriculum and funds, adding to the finding that vocational
education should be outlined.
In a whole, the literature on the relation of years of schooling
and growth is positive. But the average level of years of schooling as a
variable might be both misleading and inadequate, in international
as well as in national level, when used in the comparative study
of human capital among countries. Also, another important issue
is the unobserved heterogeneity on a national level meaning that
e.g. the cultural values of a country that will be missing from the
econometric model, will in the end result in inaccurate findings
derived from the education production function. As very often
is the case, one year of school attendance in Europe happens to
be in many respects different from one year in Asia, or between
countries for example. The comprehension of the way individual
agents decide on the way they will distribute their wealth upon
the cultivation of themselves and their families is something that
In the process of looking for economic meaningful causal
relations Linear and Nonlinear Granger causality tests were
applied. Except for the classic Engle-Granger test, Diiks and
Panchenko non-parametric methodology for both unidirectional
(asymptotic) and bidirectional (bootstrapped) causality was
adopted. Johansen Cointegration testing gives us the existence of
of cointegrating vectors (Trace statistic) justifying the equilibrium
relationship that exists between them. It indicates the existence
of 4 cointegrating vectors, which is the signal that allows us to
continue further with the analysis. The fact that the random walk
of our variables, is relatively not that random at all, is immediately
translated as a very close relationship at hand (Table 1).
Max-eigen statistic indicates one cointegrating relationship,
which again confirms our hypothesis, and allows to go further
with the procedure of causality testing. We examined the dynamic
relationship between GDP per capita, public expenditures in
education and students’ enrollments of all 4 levels namely
preschool, primary, secondary and tertiary education for Greece in
the 1960-2015 period. Compared to the results of the Asteriou &
Siriopoulos  study causality now appears to be weak especially
for the case of Higher education (Table 2-5).
Until today Greece has been following a rather moderate rate
in education expenditures as of 1960 and on (Figure 1). Part of
this is attributed to European directive of education funding of the
EU-average of 5% (Figure 2) which has been followed by almost
every European country [6,7].
In terms of current prices and when compared with other
European countries to the number of school entrants especially
for Higher education it does not go according to the raw numbers
(Figure3). For a number of 600.000 HE students Greece has been spending a 4.4 % of its GDP , when at the same time France with
1.000.000 students spends 10 times as much in million euros
(Figure 4) and the Netherlands with almost the same number
of students spends at least 4 times more but all three countries
follow the equivalent of 5% of GDP [8,9].
In the era of knowledge economy, interest in education must
be of greater importance. Students pursuing further with their
studies can provide the pedestal for a stronger economy and a
better skilled labour force. Human capital is and will continue to
be a driving force for businesses. The education system in Greece
needs to adopt a more comprehensive investment policy in order
to reply to a great number of individual agents who believe in
augmenting their utility through schooling.
Gary S Becker (1964) Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education. Columbia University Press. pp. 145-190.
Mincer J (1974) Schooling, Experience and Earnings, Columbia University Press for NBER. New York, USA.
Asteriou D, Siriopoulos C (1997) Can Educational Expansion Function as A “Seed” Of Economic Development in Developing Countries? City University. Department of Economics and Applied Econometric Research Unit. Discussion Paper Series. p. 68.
Kassapi S (2016) The Long-Run Causal Effects of Public Investments: Economic Growth and the Provision of Schooling. Greece 1960-2015. Parametric and Nonparametric Approach. Doctoral dissertation. pp. 1-435.
Kassapi S (2017) Long-run Causal Effect of Greek Public Investments. In: Bilgin M, Danis H, Demir E, Can U (Eds.), Regional Studies on Economic Growth, Financial Economics and Management. Eurasian Studies in Business and Economics 7: 215-229.