Interlinkages Between Institution and Education in Developing Countries

Abstract

Recent literature focuses on the role of institutions for economic expansion. According to institutional economics, institute is a fundamental determinant of cross country differences in education. In establishing the nexus between institution and education, this study takes the idea of institutional economics. This study contributes the present literature by finding an empirical nexus between institutions and education in case of developing countries over the period of 1996 to 2017. Breusch and Pagan Lagrangian Multiplier test has been used to choose between random effects and panel (pooled) OLS. Hausman test has been used to compare and choose between instrumental and non-instrumental approach. Fix effect or random effects or fix effect 2SLS or error components 2SLS has been chosen using Hausman test. Control of corruption is significantly and positively affected by secondary rate of enrollment. Control of corruption has positive and significant relationship with all three enrollment rates of i.e. tertiary, secondary and primary. Findings reveal that efforts are needed to curb corruption in less develop economies because it aids to improve primary, secondary and tertiary enrollment rates. Secondary enrollment rate further helps to improve control of corruption. Institution and education strengthen each other in two ways.