Educational impact on sectoral value added: evidence from African countries

Purpose This study investigates the impact of different education levels on sectoral value-added in agriculture, manufacturing, and services across 50 African countries from 2005 to 2020. By analyzing the relationship between education and sectoral outputs, it aims to provide policy recommendations for optimizing educational investments to promote economic growth. Design/methodology/approach The research employs the Generalized Method of Moments system (GMM) to address potential endogeneity. This methodology enables the study to account for the correlation between sectoral output and lagged production, while controlling for country-specific effects. The key variables analyzed include primary, secondary, and tertiary education, population growth, remittances, and access to credit. Sectoral value-added (% of GDP) in agriculture, manufacturing, and services are treated as dependent variables. Findings The results indicate that past production strongly predicts current output across all sectors. Primary education has positive effects on agriculture and services, although diminishing returns are observed at higher levels of attainment. Secondary and tertiary education initially yield negative impacts, with effects turning positive only at more advanced levels. Population growth, remittances, and credit access are identified as significant drivers of sectoral value-added. Originality/value This study offers new insights into the nuanced effects of education on sectoral outputs, addressing a gap in the literature on education’s role in Africa’s economic development. By identifying critical thresholds where education begins to positively impact sectoral productivity, it provides evidence for targeted policy interventions to optimize educational investments and enhance growth. Peer review The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-10-2024-0911