Education and Gross Domestic Product of the Philippines

• Marione Tomas T. Padilla

ABSTRACT

The research paper is about determining whether certain factors of Education have an effect on the overall Gross Domestic Product of the Philippines. Intuition would tell us that Education has an effect on GDP. In addition, budget allocations for education in the Philippines are high compared to the other sectors in the government.

Table of Contents

Introduction

Background of the Study …………………………………………………………. 4

Statement of the Problem …………………………………………………………. 5

Objectives of the Study …………………………………………………………. 6

Significance of the Study …………………………………………………………. 6

Scope and Limitation …………………………………………………………. 7

Review of Related Literature

Civilian Discretionary Spending …………………………………………………… 8

Human Capital and Education …………………………………………………… 9

Education in the Philippines

Millennium Development Goals

Similar Studies

Theoretical Framework

Gross Domestic Product

IS-LM Model

Operational Framework

Variable List

A-Priori Expectations

Methodology

Empirical Testing and Analysis of Results

Conclusion and Recommendations

References

Introduction

Background of the Study

According to Jeffrey Sachs (2011), civilian discretionary spending is spending on public goods and services that the private economy cannot provide on its own[1]. In addition, one of the sectors he mentioned that are involved in civilian discretionary spending is education. Education is defined as the knowledge and development resulting from an educational process (Merriam Webster, 2014)[2]. In any country, education is one of the things that the government is in charge of and is one of the factors in the government’s expenditures which contributes to a percentage in a country’s Gross Domestic Product (GDP); the government takes into consideration the budget allocation for education, how they are going to make the educational sector competitive i.e. the quality of the service that the citizens of the country are to get, and many other factors.

The Philippines currently has a literacy rate of 95.4% and rank 108th out of 215 countries in terms of literacy rate[3]. In addition, the educational system of the Philippines is currently experiencing a shift, because our educational system is being exposed to different factors such as the implementation of the K to 12 and the ASEAN Integration which are to be imposed soon. In the previous education system of the Philippines, kindergarten was not compulsory for students but now it is. In addition, Primary Education (Elementary) and Secondary Education (Junior and Senior High School) both require 6 years making a total of 12 years. Because of these adjustments and other factors, the budget and the expenditure for education increase every year. The Department of Education is one of the top departments that are given high budget allocations with their proposed 2014 budget being the highest at 293.3 billion pesos; according to an article in Rappler (2013), “the increase is focused on learning resources, as well as classrooms, chairs and school facilities”[4]. But despite all of this, the overall quality in the education has declined and this was due to certain factors (insert them here). With this given, this proves to be a challenge not just for the government but for the other Filipinos as well that could not cope up with the Philippines’ current system of education. According to World Vision (2011)[5], education has a relationship with growth of an economy i.e. lack of quality education is a threat to economic growth. In addition, World Vision also stated that 92 percent of Filipino children are able to enroll in primary education but 20 percent of these students who enrolled are able to finish.

Statement of the Problem

The Philippines experienced a decline in the quality of education due to certain factors such as the quality of the education, affordability, budget, and mismatch between training and the jobs[6]. With this, the researcher has prepared the following questions:

a) How can the Philippine government fix or alleviate these factors?

b) Were there any measures taken in line with the previous question? What specific measures were done and were they effective?

c) Are Filipino students (both current and incoming) ready for K to 12 given the decline in the quality prior to the implementation?

d) Is K to 12 really a step further for the Philippines?

The researcher would also want to know if the budget that has been allocated to them is being used efficiently and in the end if it contributed to the output of the country. In addition, the researcher would also want to clarify if these expenditures in education really did make any changes.

Objectives of the Study

Given the background of the topic for this research, the researcher would like to accomplish the following objectives:

a) Determine the relationship between certain factors of education i.e. number of enrolled students and education expenditure, and the Gross Domestic Product of the Philippines

b) Be able to find ways to improve the quality of the educational system of the Philippines so that we can be really ready for future changes.

c) Construct an econometric model that can be used in analyzing how GDP and Education go hand in hand.

Significance of the Study

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A lack of quality education can hamper growth in the economy because the citizens are not equipped with the basic knowledge; in addition, a lot of Filipinos do not have access to even the basic education and because of this, the human condition is not improving. In the Human Development Forum held last March 2, 2011, U.S Secretary of Education Arne Duncan stated that Education can be the bridge to factors such as eliminating gender inequality, poverty reduction, planet sustainability, preventing deaths and illnesses, and for peace.

In addition, he stated that education is inseparable from the development of human capital, and that education is the new currency so that nations maintain economic competitiveness and global prosperity (Duncan, 2011)[7].

In line with the previous statement, this study is aiming to find a way to be able to improve the standard of education that the Philippines has and to make it competitive. In addition, this study aims to make a point that education plays a role in the growth of a country and is a step towards improving lives thus we should not take this lightly. The researcher believes that the government should look into the bigger picture and the root causes as to why our education is not accessible or feasible to the citizens.

Scope and Limitation

The data used in this study came from sources such as indexmundi, World Bank, NSCB, and UNData. The researcher took into consideration GDP, Education Expenditure (not including capital and equipment), and number of enrolled students per year level except the Tertiary Level due to unavailability of data; the research has 30 observations (from 1982 to 2011) and is focused on a Philippine setting. The researcher is using the multiple regression analysis to determine the influence of our independent variables to the dependent variable.

Review of Related Literature

Civilian Discretionary Spending

The Huffington Post (2011), posted an article entitled “De-Mystifying the Budget Debate”; this article was written by Jeffrey Sachs. One of the things that Jeffrey Sachs pointed out was the issue on civilian discretionary spending. Civilian discretionary spending is spending on public goods and services that cannot be provided efficiently by the private economy alone (Sachs, 2011). In addition, the programs are called “discretionary” because the budget allocation is voted upon every year and contributes to about 4% of the GDP in the United States. He also mentioned the factors that make up civilian discretionary spending in the following quote[8]:

“Discretionary spending includes national security (homeland security, diplomacy, development assistance); education and job training; science and technology; the justice system; public administration; environmental protection; community development and housing assistance; major infrastructure (highways, dams, levees, flood control, water and sanitation).”

From the given definitions and statements, the aim of civilian discretionary spending is to make a country competitive and so that there would be more opportunities for economic growth.

Human Capital and Education

According to Investopedia, Human Capital is defined as “a measure of the economic value of an employee’s skill set” wherein it measures the labor input and is thought to be equal[9]. The term was coined by economist Theodore Schultz; this term mirrored human capacities and believed that human capital was like any other capital in general. Capital is defined as those long term assets used in the production of output by a firm. In the case of human capital, education, training and enhanced benefits are the factors to be considered when investing in human capital; in effect this will lead to an improvement in the quality and level of production. In addition, the education and the experience an employee has obtained merits economic value in the perspective of both employers and the aggregate economy.

The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) published a study in 2001 entitled Development Planning in a Market Economy; One segment of this study, The Role of Human Capital in Economic Development: Some Myths and Realities, explains how important Human Capital is in Economic Development[10]. The author stated that for human capital to create an impact on economic development, a nation needed to have at least a 70% literate population. In addition, it was also stated that if a large number of people in the population are literate, even if they are equipped with the basic education, the minds of the masses can be opened up (UNESCAP, 2001). It was also mentioned that the government has a role in this i.e. one of the factors as to why there are differences in human capital was because of the direction of the priorities and commitments of a nation towards the educations sector[11] (UNESCAP, 2001).

An entry in the Encyclopedia of Educational Philosophy and Theory (EEPAT), entitled Human Capital Theory and Education, one concept introduced is the Human Capital theory wherein it states that the framework for nation state policy framework is by enhancing the flexibility of labor in the labor market, and also enhancing skills through investment in education, training and employment schemes, and immigration focused on attracting high-quality human capital (Fitzimons , 1999)[12]. In that same entry, Fitzimons (1999) referenced Adam Smith’s The Wealth of Nations (1776) wherein Adam smith was able to formulate a basis for the science of human capital. In addition, two schools of thought were formed; the first school of thought distinguished acquired capacities that were classified as either capital or the human being themselves, who were not counted as capital. The second school of thought, on the other hand, claimed that human beings are considered capital.

Operational Framework

Variable List

The table below presents the variables that have been used in the study. The model has four independent variables and one dependent variable. The regression to be performed will take into account the significance of the variables, both individual and overall

References

education. 2014. In Merriam-Webster.com.

Retrieved April 5, 2014, from http://www.merriam-webster.com/dictionary/education

Sachs, J. (2011, April 18). De-Mystifying the Budget Debate. The Huffington Post.

Retrieved April 5, 2014, from http://www.huffingtonpost.com/jeffrey-sachs/de-mystifying-the-budget_b_850332.html

Geronimo, J. (2013, July 30). DepEd’s proposed 2014 budget ‘biggest in history’. Rappler. Retrieved April 5, 2014, from http://www.rappler.com/nation/35186-deped-proposed-budget-biggest-in-history

Philippines. (n.d.). World Vision. Retrieved April 5, 2014, from http://www.worldvision.org/our-impact/country-profiles/philippines

Philippines. (n.d.). Find the Data. Retrieved April 5, 2014, from http://country-facts.findthedata.org/l/111/Philippines

Mankiw, G. (2013). The Data of Macroeconomics. Macroeconomics (8th Edition ed., p. 18). New York: Charles Linsmeier.

Human Capital. (n.d.). Investopedia. Retrieved April 5, 2014, from http://www.investopedia.com/terms/h/humancapital.asp

Gary S. Becker. “Human Capital.”The Concise Encyclopedia of Economics.2008. Library of Economics and Liberty. Retrieved April 5, 2014 from the World Wide Web: http://www.econlib.org/library/Enc/HumanCapital.html

Patrick Fitzsimons. (1999). Human capital theory and education. InThe Encyclopaedia of Educational Philosophy and Theory, M. Peters, T. Besley, A. Gibbons, B. Žarnić, P. Ghiraldelli (eds.). Retrieved 5 April, 2014 fromhttp://eepat.net/doku.php?id=human_capital_theory_and_education

An Analysis on the Education and Gross Domestic Product of the Philippines 1

[1] Civilian Discretionary Spending will be elaborated in the Review of Related Literature.

[2] Definition of education taken from http://www.merriam-webster.com/dictionary/education

[3] Statistics taken from http://country-facts.findthedata.org/l/111/Philippines

[4] The full article can be seen at http://www.rappler.com/nation/35186-deped-proposed-budget-biggest-in-history

[5] Taken from http://www.worldvision.org/our-impact/country-profiles/philippines

[6] Retrieved from http://www.ph.net/htdocs/education/issue.htm

[7] The Full transcript can be viewed at http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/0,,contentMDK:22848251~menuPK:282425~pagePK:64020865~piPK:149114~theSitePK:282386,00.html

[8] This section explains the factors that make up civilian discretionary spending; note that this is an excerpt from the article mentioned. The article can be found at http://www.huffingtonpost.com/jeffrey-sachs/de-mystifying-the-budget_b_850332.html

[9] Definition taken from http://www.investopedia.com/terms/h/humancapital.asp

[10] The file for the said part can be found at http://www.worldwewant2015.org/node/296253

[11] This quotation can be seen on the same file mentioned. Refer to footnote number 10.

[12] Retrieved from http://eepat.net/doku.php?id=human_capital_theory_and_education