How Education and Investment Affect Economic Growth in Asian Developing Countries?

Malika Rajabova^1,*, Nurdaulet Karabayev²

¹Tashkent State University of Economics, Uzbekistan
²Eurasian National University, Kazakhstan

Emails: m.rajabova@tsue.uz; punpuruwu@gmail.com

Abstract

This study investigates how education and investment influence economic growth across selected Asian developing countries, with a particular focus on whether these relationships differ by income level and institutional context. Using panel data from 2010 to 2023, countries are divided into upper-middle-income (China, Indonesia, Malaysia, and Kazakhstan) and lower-middle-income (Uzbekistan, Tajikistan, Pakistan, Kyrgyzstan, Bangladesh, Philippines) groups. The analysis employs multiple regression models to examine the effects of government education expenditure, school enrollment rate, gross capital formation, labor force participation, foreign direct investment, and population dynamics on GDP per capita. Diagnostic tests, including Variance Inflation Factor (VIF), are applied to ensure model reliability. The findings reveal that education plays a stronger role in promoting economic growth in upper-middle-income economies, while lower-middle-income countries experience weaker and less consistent relationships. The findings suggest that the growth effects of education and investment depend on development level and institutional quality, emphasizing the need for tailored policy approaches. In upper-middle-income countries, policies should prioritize improving education quality and aligning skills with labor market demands, while also strengthening the connection between investment and workforce capacity. In contrast, lower-middle-income countries require broader structural reforms, including better governance, improved education outcomes, and incentives for school completion.

Keywords: Economic growth; Education expenditure; Investment; Asian developing countries; Income classification; School enrollment