The relationship among education expenditures, economic growth and income distribution

At the present time achieving equity in the distribution of income and sustainable economic growth are two main goals that both developing countries and developed countries pursue. Education expenditures are an important instrument to reach an equal income distribution and to have sustainable economic growth and economic development.The purpose of this study is to investigate the long-run relationship among education expenditures, economic growth and income distribution in the 25 OECD countries over the period from 1980 to 2008 by using updated and extensive variables and utilizing theoretical approach and the Panel cointegration, Pedroni DOLS, Panel FMOLS, Panel Causality methods.Theoretical approaches show that education expenditures affect economic growth, personal income and income distribution positively.Pedroni, Kao and Johansen Fisher Panel cointegration results show that there is a long-run relationship among education expenditures, economic growth and income distribution in the long-run. The coefficients of panel cointegration are estimated by using Panel DOLS and Panel FMOLS methods which are developed by Pedroni (2000i 2001). Also in this study the short-run and long-run panel causalities are investigated. According to results of this study;?The hypothesis that ?Increase in public education expenditures enhances economic growth by raising productivity? is supported by Panel FMOLS, Panel DOLS and Panel Causality test.?The hypothesis that ?Increase in public education expenditures helps to reach a more equal income distribution? is supported by Panel FMOLS, Panel DOLS and Panel Causality test.?The hypothesis that ?Economic growth enhances the public budget resources and this in turn helps to allocate more resources for public education expenditures? is supported by Panel FMOLS, Panel DOLS and Panel Causality test.?The hypothesis that ?An equal income distribution helps to allocate more resources for public education expenditures? is supported by Panel FMOLS, Panel DOLS and Panel Causality test.?The hypothesis that ?A rise in the economic growth helps to reach more equal income distribution? is not supported by Panel FMOLS, Panel DOLS and Panel short-run Causality test. It is supported only by Panel long-run Causality test.The findings of this study provide strong evidence on the existence of significant relationship among education expenditure, economic growth and income distribution in the long-run.