Public Education Expenditure and Economic Growth in Egypt: An ARDL Bounds Testing Approach

The relationship between public education spending and economic growth remains contested in developing economies, where quality, not just quantity, of investment may matter most. This study examines whether public education expenditure has driven economic growth in Egypt over 1980–2023, addressing the under-studied role of education quality and testing the robustness of the estimated relationship to structural breaks linked to major reforms. Using the Autoregressive Distributed Lag (ARDL) bounds testing approach together with Zivot–Andrews structural break unit root tests and CUSUM/CUSUMSQ parameter-stability tests, the study models short- and long-run effects of education expenditure on GDP growth, controlling for capital formation, labor participation, trade openness, and foreign investment, and incorporating quality proxies such as student–teacher ratios and completion rates. The bound F-statistic (6.23) exceeds the 5% upper-bound critical value of 3.83 (Narayan in 2005 on small-sample critical values), confirming long-run cointegration, and the error-correction coefficient (−0.835, p < 0.01) indicates rapid adjustment to equilibrium. Physical capital is the strongest driver of long-run growth, while education expenditure shows a weakly negative long-run association (significant at 10%), suggesting allocative inefficiency rather than absent returns; quality proxies (completion rate, student–teacher ratio) show a negative short-run and positive one-period-lagged effect, consistent with a delayed adjustment process. Stability tests confirm the long-run relationship is structurally invariant once short-run dynamics are accounted for. Thus, improving the efficiency and quality of education spending, rather than its volume, appears essential for Egypt to advance Vision 2030, SDG 4, and SDG 8.