How public education policies drive economic growth in ASEAN : an analysis of resource allocation theory, human capital accumulation, and structural transformation pathways

This study examines how public education policies influence economic growth across ASEAN nations through the theoretical lens of resource allocation theory. While ASEAN has maintained an average GDP growth rate of 5.1% since 2000, significant disparities between high-growth and low-growth economies persist in educational investment and outcomes. Methodologically, the study conducts empirical studies and integrates panel data (1990–2023) across ten member states that underwent spatial econometrics analysis. It dissects three transmission pathways: (1) human capital accumulation enhancing labor productivity via skill development; (2) educational stratification driving industrial restructuring; and (3) spatial spillovers facilitating cross-border knowledge diffusion. These mechanisms are operationalized through spatial autoregressive (SAR) modeling, which explicitly accounts for interdependencies in ASEAN’s integrated economic landscape. As noted in methodology, the SAR framework’s incorporation of spatial weight matrices captures intra-national policy effects and inter-country spillovers. The main findings from empirical results reveal: First, primary education investments demonstrate diminishing returns beyond 4.2% of GDP in ASEAN’s low economic growth (agrarian) economies, where infrastructural constraints limit absorptive capacity. Second, vocational training exhibits negative spatial dependence when misaligned with regional industry needs. Third, higher education in innovation-driven economies generates significant positive spillovers, with 1% expenditure increase elevating neighboring economies’ GDP by 0.8% through skilled labor migration. Furthermore, urbanization plays a critical role as a mediator, with its effects heavily influenced by the quality of human capital. The data indicated that urban consumption capacity contributes 48% of education-driven economic growth. The study contributes to policy science by developing a spatial framework for evaluating education policies regional heterogeneity. It recommends three reforms: (1) establishing ASEAN-wide education expenditure benchmarks adjusted for spatial spillover potential, (2) creating cross-border vocational education zones aligned with regional industry clusters, and (3) implementing spatial monitoring systems to track external policy. These findings highlight how spatial considerations should shape resource allocation strategies. This paradigm shift holds significant implications for the ASEAN region and provides valuable insights for other developing economies to achieve equitable and sustainable national economic development.