Modelling the return to public expenditures on education: The case of Azerbaijan

Building strong educational infrastructure and increasing the human capital potential is one of the major goals in public policy decision making process. This issue is much more crucial for resource-rich economies to reach sustainable development in the long-run. In this context, public expenditure on education is the most important source. This paper investigates long-run impact of public expenditures on education over non-oil GDP in Azerbaijan for 2000Q1-2017Q3 by employing ARDLBT approach to cointegration. Empirical results displays existence of long-run association. The impact of public expenditures on education over non-oil GDP is positive, economically and statistically significant in the long-run. To achieve diversified economy with strong non-oil sector, Azerbaijan should continue to invest to human capital development and public expenditures on education should be at the focus while allocating budget resources.

• Public expenditure
• education
• non-oil GDP
• human capital Azerbaijan