Authors: Ioannis Papanastasiou, Antonios Athanassiadis

Title: Convergence of Educational Expenditures: An Application of Modified LLC Test in Selected EU and OECD Countries

Abstract

The issue of convergence of expenditures as percentage of GDP on human capital enhancing activities, such as education and health, is an old one. In general the empirical examination of the convergence question is done with the use of panel unit root tests since these tests are having better power and size properties than the conventional ones.

In this direction, since Levin and Lin (1993) established the foundations for panel unit root tests, a few tests for panel unit roots have been proposed to test for convergence in a panel of countries and to identify any convergence clubs. Among those, the most common tests in practice are Levin-Lin(LL), Im-Pesaran-Shin (1997)(IPS), Maddala-Wu (1999)(MW), Levin,Lin, and Chu (2002) (LLC) and Phillips and Sul (2007) (PS).

In this paper the convergence of educational expenditures as percentage of GDP among various countries is investigated by using the modified LLC test.