THE PARADOX OF EDUCATIONAL INVESTMENTS: A COMPARATIVE ANALYSIS OF WESTERN AND EASTERN EUROPE

Olga Gagauz; Artiom Samohvalov

doi:10.36004/nier.es.2024.2-08

Authors

Olga Gagauz Habilitated Doctor in sociology, Associate Professor, National Institute for Economic Research, Academy of Economic Studies of Moldova https://orcid.org/0000-0002-1175-1008
Artiom Samohvalov National Institute for Economic Research, Academy of Economic Studies of Moldova https://orcid.org/0009-0007-9383-3237

DOI:

https://doi.org/10.36004/nier.es.2024.2-08

Keywords:

: economic growth, education investments, causality, regression model, lagged variables

Abstract

Education is widely recognized as a key driver of economic growth, yet the effectiveness of public spending on education varies significantly across different economic and institutional contexts. The study examines the impact of lagged government investments in education, including higher and secondary education, on GDP per capita based on purchasing power parity (PPP) across European countries in the 21st century. The study differentiates between Western Europe, Eastern European EU member states, and Eastern European non-EU countries, analyzing investment trends and their effects on economic growth.

Using a cross-country regression analysis based on data from the World Bank and the International Monetary Fund (2001–2023), the study incorporates lagged variables to establish causality. The findings reveal that while investments in education positively influence GDP growth per capita in Western European countries, their effects in Eastern Europe are more complex. In non-EU Eastern European countries, higher public spending on education does not necessarily translate into economic growth and, in some cases, correlates with lower growth rates. These disparities stem from differences in institutional efficiency, labor market structures, migration patterns, and the extent to which education systems align with economic demands.

By providing a comparative perspective, this study contributes to the ongoing debate on the role of education in socio-economic development and highlights the need for tailored educational policies that account for country-specific economic and institutional conditions.

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