How Education Impacts Economic Growth Essay Example

Paper Type:  Essay
Pages:  6
Wordcount:  1496 Words
Date:  2022-12-06

One of the major fundamental factors for economic growth is education. Therefore, there is no country that can meet its sustainable economic growth and economic development without ensuring that substantial investment in human capital is met. Concerning the effects of education on economic growth, people ought to consider education. Since education enriches understanding of many people as well as the understanding of the world. Education plays significant roles in the lives of people. Through improving the quality of the lives they live. The productivity and creativity of many people are raised by education. Additionally, education tends to promote entrepreneurship and advances the technology that is used in different sectors. Therefore, it is evident that education plays a critical role in economic growth as it improves the distribution of income as the paper discusses. How education impacts on economic growth

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A firm can only realize perpetual economic growth through increased competition. The creation of a national surplus would require a company to enhance the quality and quantity of their work output. Some of the measures that are put in place are the improvement in their production through the acquisition of the technical skills that would drive growth within the company (Valero & Van 2019). When an economy can churn out quality graduates, either from the professional schools or the universities, they tend to gain technical skills and engage in entrepreneurship which would then facilitate economic growth within the country. The increment in the work production rates within an economy is ideal in the creation of more jobs and improving the volume of goods that can be exported to the other countries.

Education can also improve the earnings that the country would realize (Deng & Zhao 2018). The countries that invest in quality education and resource their university and colleges often benefit from high enrollment rates by the students. Such an institution can also attract the international students who would pay more elevated than the local students, thus, improving the revenue earnings for the home country. Besides the gains, the universities and colleges would benefit the economy through the provision of job opportunities for the locals (Deng & Zhao 2018). Some of the professionals with the guarantee of getting jobs when investment in education is realized include publishers, teachers, lecturers, administrators, career advisors, professors, and the general laborers. Such would then reduce the unemployment rates within the country and increment in the tax nets within the state.

Education also tends to attract foreign direct investment within the state. Such often happen when the education institutions in the country make their investment in research and development. Research and development lead to the acquisition of new knowledge that can lead to low cost of production of finding new treatment methods in an economy. The foreign direct investment would often lead to the stimulation of economic growth within the country. Education matters when it comes to the economy of any country. The level of education of a given population affects the economy of a country. For instance, when there is a high rate of intellectuals in the country, the possibility of employing intellectual laborers becomes high. Thus, increasing the rate of Gross Domestic Product of the country.

Additionally, education tends to generate indirect impacts of both monetary and non-monetary nature. Based on the non-monetary effects, there are different forms of non- monetary effects. Such is active participation in the process of democratization, social tolerance at a higher level and solidarity on both national and international levels. Concerning these forms of non-monetary effect forms, it is evident that education helps in non-monetary nature apart from playing a crucial role in the economy of a country.

According to the human capital theory which suggests that investments made in education and health create human capital just the same as the costs of equipment and any material leads to the creation of material capital. When investments are done on human capital, that is, when investments are made on education, an increase in the skills and abilities of every individual is realized (Pelinescu 2015). Therefore, the growth of labor productivity increases thus, leading to the economic growth of the country. This confirms that education is regarded to be an investment in the quality of human capital.

Consequently, the accumulation of material goods is not lead to the economic growth of any country but the development of knowledge and skills. Such are only acquired when education is considered (Pelinescu 2015). This is evident in the conclusion that has been made by the World Bank experts that support the fact that the pace of economic growth is only determined by both training and qualification of employees at every level. Ideally, progressiveness through means of scientific and industrial work and scale of development of priority areas of science and technology are ways in which the pace of economic growth can be determined. Therefore, from the argument by the World Bank experts, it shows that education matters when it comes to determination of an increase in economic growth.

Education impacts economic growth positively based on research and development. This is one of the crucial areas in which education influences economic growth. For instance, the system of higher education makes scholarly staffs prepare in the emergence of new knowledge and innovations. Thus, impacting the growth of labor productivity in a positive way. Additionally, higher education plays a crucial role in the promotion of science; therefore, determining the ability in mastering innovations as well as adopting such innovations (Apatov & Grimes 2019). However, there are some education researchers that tend to argue that none has provided data that shows the relationship between the economy's health and the performance of schools.

Basically, the critique sometimes regarded important since, when putting more emphasis on the understanding that schooling is one of the critical factors that lead to the economic growth of a country. There is also a need to understand that having schools does not matter in making the country to succeed economically; instead what students learn in such schools ought to be considered. For instance, schools in Japan cannot be rated to be the same with schools. Since some schools value cognitive skills. Therefore, in order to measure the country's human capital that will lead to increase in economic growth, there is need to measure the performance of students on test in both math and science, since, through quality learning of both math and science prepares one to perform well in the workforce that involve the use of new technologies. Therefore, leading to economic growth in a country. This, thus, confirms the critique to be more crucial when weighing how investment in human capital can be of more significance in enhancing the pace of economic growth.

According to the assessment conducted by the Organization of Economic Co-operation and Developments concerning international math and science assessment. The level of cognitive skills of different nations' students shows a significant effect on the economic growth of such nations. Therefore, from the assessment, it is evident that through increasing years of schooling that ought to be attained by the labor force can only boost the economy if the levels of increased school attainment also boost cognitive skills. This, thus shows that spending more time in school does not boost the economic growth of any country rather, doing something constructive in school may lead to the increase of economic growth of a country majorly through considering learning math and science. Since they are the subjects that entail gaining of knowledge that is directed to the emergence of a new generation of knowledge and innovations together with its adoption.


In conclusion, natural resources and human capital are the two major prerequisites of economic growth in any given economy. The improvement in human capital can be realized through the investments in education, training and medical care. Such would require the country to increase the number of people who are enrolled in their universities and colleges and the perpetual skills improvement in a country. The investment in tertiary education often leads to higher earnings by the individual and the further increase in the quality and quantity of production owing to the technical and technological skills that the tertiary trainees would gain from the colleges. However, there is a range of factors that economists need to look into when examining investment in human capital. Such include the differences in wages between highs school and college graduates, the cost of training such education and the age of the population who need to go through such an education process.


Deng, L., & Zhao, Y. (2018). Effect Channels of Education Level and Cognitive Skill on Economic Growth. Kuram ve Uygulamada Egitim Bilimleri, 18(5), 1440-1449.

Pelinescu, E. (2015). The impact of human capital on economic growth. Procedia Economics and Finance, 22, 184-190.

Apatov, E., & Grimes, A. (2019). Impacts of Higher Education Institutions on Local Population and Employment Growth. International Regional Science Review, 42(1), 31-64.

Valero, A., & Van Reenen, J. (2019). The economic impact of universities: Evidence from across the globe. Economics of Education Review, 68, 53-67.

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