role of knowledge in supporting growth across indian states a co-integration and causality approach角色知识在印度国家支持经济增长的协整和因果关系的方法.pdf

Modern Economy, 2012, 3, 346-354 /10.4236/me.2012.33045 Published Online May 2012 (http://www.SciRP.org/journal/me) Role of Knowledge in Supporting Growth across Indian States: A Co-Integration and Causality Approach Arindam Banik, Rabia Khatun International Management Institute B-10, Qutab Institutional Area, New Delhi, India Email :arindambanik@, rabiarabs1@ Received October 1, 2011; revised November 10, 2011; accepted December 9, 2011 ABSTRACT This paper uses cointegration and vector error-correction models to analyse the causal relationship between education and development across select Indian states using annual data from 1980-81 to 2008-09. Expenditure on education per capita is used as the proxy for education, while State domestic product per capita is the proxy for development. The empirical results provide some evidence of bi-directional causality in Indian States such as Kerala, Karnataka, Andhra Pradesh, Maharashtra and Tamil Nadu. There is also evidence of causation running from per capita expenditure on ed- ucation to per capita State domestic product in either the short or long run in states such as Bihar, Arunachal Pradesh, Uttar Pradesh, West Bengal, Punjab, Orissa, Madhya Pradesh, Gujarat, Rajasthan, Haryana and Punjab. Thus, there is some indication that the observed positive correlation across states between expenditure on education and growth re- flects primarily the influence of government effective intervention in the education sector. Keywords: Co-Integration; Indian States; Education Expenditure; Growth 1. Introduction labour further added to the problem of capital flow to the capital-poor countries. Pritchett [8] examined two aspect