Abstract:

The Baltic states have paid attention to education as one of the leading activities that enhances economic development. In the scientific context, there is disagreement among researchers on the effect of education expenditure on economic development. Some researchers find evidence that education expenditure has a positive impact on economic development, while other researchers detect either weak or no relationship between these indicators. Therefore, this investigation focuses on the question of whether increasing education expenditure can promote economic development in the Baltic states, such as Lithuania, Latvia, and Estonia. Statistical data from 1995 to 2020 have been used in the research. The author has applied the econometric technique, including descriptive statistics, correlation, and linear regression analysis. The results of the research have shown that during the analysed period, education expenditures increased significantly in all three Baltic countries: in Lithuania 9.5 times, in Latvia 7.3 times, and in Estonia 8.1 times. At the same time, real GDP per capita grew, averaging about three times in the countries analysed. The largest variation in education expenditure occurs in Lithuania, followed by Latvia and Estonia. This shows that Estonia has pursued a more moderate funding policy in the education sector than Lithuania and Latvia. Moreover, the investigation reveals a very strong and positive relationship between education expenditure and economic development. Education expenditure explains over 90 percent of the variation in the economic development expressed by real GDP per capita in all three Baltic countries. Additionally, the increase in education spending by 1 million euros, real GDP per capita tends to increase by an average of 5 euros in Lithuania and Latvia and 6 euros in Estonia. The insights of the research could be applied in shaping the economic development policy of the Baltic states and in pursuit of sustainable development goals (SDG), such as quality education (4 SDG) and economic growth (8 SDG).

Keywords:

Education expenditure, economic development, Baltic states.