IMPACT OF EDUCATION ON ECONOMIC GROWTH. THE CASE OF RWANDA
Abstract
This paper focused on the impact of education on economic growth in Rwanda. It was an attempt to explore the extent to which investment in education level by the Government of Rwanda affects its economic growth hence the output level is achieved. The government of Rwanda has year by year increased budget for education. In 2019/20, the Government of Rwanda allocated FRW 310.2 billion to the education sector, up from FRW 278.2 billion in 2018/19, reflecting an increase of 11.5 per cent in nominal terms or 10.4 per cent in real terms. The study adopted Cobb-Douglas production function with rate of returns being constant to scale where human capital is treated as an independent factor of production in the human capital augmented growth model. Data that exists from the National Institute of Statistics Rwanda for a period 1999 to 2019 reports. The results revealed that human capital plays an important role in economic growth mainly as an engine for improvement of the output level. There is compelling evidence that human capital increases productivity, suggesting that education really is productivity-enhancing rather than just a device that individuals use to signal their level of ability to the employer. The variables were significantly fit the model as it was shown by the R2 Adjusted –higher than 55% which shows strong goodness of fit in the short run estimated model. As conclusion since there was no problem of multicollinearity the goodness of fit is achieved. The study concludes that education has positive effect on economic growth. The study recommends that the government of Rwanda should encourage the citizen to engage in education. The government of Rwanda might do this directly by supporting infrastructure, small farmers, building schools in order to resolve those problem and external aids have significant on economic growth.
Keywords: Education, Human Capital, Economic Growth, Cobb-Douglas Function, Rwanda
CITATION: Rwigema, P. C. (2020). Impact of education on economic growth. The case of Rwanda. The Strategic Journal of Business & Change Management, 7(2), 490 – 512.
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DOI: http://dx.doi.org/10.61426/sjbcm.v7i2.1641
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