Education Expenditure and Sustainable Human Capital Formation: Evidence from OECD Countries

This study empirically examines the determinants of sustainable education finance by analyzing how income level, income inequality, fertility rate, and population density influence education expenditure as a share of GDP. Using annual data for 38 OECD countries from 1997 to 2021, the analysis applies fixed-effects and moment quantile regression (MMQR) models to capture both average and distributional dynamics. The results reveal a nonlinear inverted-U-shaped relationship between income and education spending, suggesting that fiscal commitment to education rises at early stages of development but tends to decline once income surpasses a certain threshold. Fertility rates show a significant negative association with education expenditure, while population density exhibits a positive effect. Moreover, the MMQR results highlight heterogeneity across countries, indicating that income growth has a stronger effect in economies with lower initial spending. These findings underscore the need for flexible, inclusive fiscal and institutional frameworks that adapt to national income levels and demographic transitions to ensure the long-term sustainability of education finance.