Impact of higher education on economic growth: evidence from Central Asia based on autoregressive distributed lag-pooled mean group estimation

Purpose This study empirically analyzes the relationship between Central Asian countries’ economic growth and higher education and the influence of foreign direct investment (FDI) and Internet penetration. The results validate human capital theory in relation to transitional economies and reveal complementary elements that improve education’s contribution to economic growth. Design/methodology/approach Using a panel autoregressive distributed lag-pooled mean group (ARDL-PMG) estimator, this study analyzes data from 2000 to 2023 (T = 24) for Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan (N = 5). We measure higher education using government expenditure on tertiary education and tertiary enrollment rates, and GDP per capita represents economic growth, introducing Internet use and FDI as mechanism variables. Findings The results reveal the significant, long-term positive effects of higher education on economic growth, validating human capital theory in transitional economies and highlighting the necessity of complementary digital and investment infrastructure. Long-term results show that a 1 percentage point rise in higher education expenditure (EXP) enhances GDP per capita by 2.36%, while a 1 percentage point increase in tertiary enrollment (ENR) raises GDP per capita by 2.67%. The short-run effects of enrollment are negative, indicating transitional adjustment costs prior to the realization of long-term gains. Practical implications Central Asian policymakers should prioritize long-term investments in higher education and digital infrastructure to maximize economic benefits and encourage inclusive growth. Strengthening the link between university programs and job market demands helps accelerate the process of converting education into higher productivity. Originality/value This study contributes to the literature by providing region-specific empirical evidence from Central Asian countries, a transitional region where limited research has been conducted. Results reinforce human capital theory and emphasize the complementary impacts of education, FDI, and digital infrastructure on economic growth.