Education is one of the most important government expenditures, and is touted by many as a fundamental factor in leveling the field, overcoming inequality to achieve sustainable economic growth and prosperity. It is also a means to further opportunities for greater social development and societal wellbeing. In this study World Bank’s information spanning from 1972 to 2011 is used, and the premise of education’s role in economic growth is tested by studying Granger’s causality of education spending in both developed and developing countries. While countries with high growth rates invest more in education, such increased educational spending does neither imply nor determine necessarily an increased growth. This result sheds doubts on the efficacy of government spending in education and its role in the economic growth of nations. The work presented aims to contribute from the public policy perspective, leaving open the possibilities for future, more disaggregated studies on this subject.

Keywords: Education, expenditures, government policy, public policy, developed countries, developing countries.