Education expenditures and unemployment relationship: Panel causality analysis for OECD countries

Education trains individuals with the skills required for both traditional and modern economies and turns them into more qualified capital. Therefore, education is an important variable that enables the economic growth and development of countries. Developed and developing countries allocate great resources for education expenditures. Efficient and effective use of resources plays an important role in economic growth and development. In a rapidly growing and developing economy, the employment rate will increase and the level of unemployment will decrease. Qualified workforce is an important factor that accelerates the economic growth and development of countries. It is expected that employment will increase and unemployment will decrease in developing and growing economies. In the study, econometric analyzes were performed for 33 OECD countries between 2008 and 2017, using OECD data. For this purpose, education expenditures were analyzed first, then the labor market and especially unemployment theories were emphasized. Then, an econometric analysis was performed using the Dumitrescu-Hurlin causality test to determine what kind of causality exists between education expenditures and unemployment. The findings show that there is a one-way causality relationship between education expenditures and unemployment. Education expenditure is the cause of unemployment, but unemployment is not the cause of education expenditure. In the last part of the study, the econometric analysis results are interpreted and policy recommendations are given.