Role of Labor Market Education Quality in Driving Economic Growth and Value-Added Agriculture : A Malaysian Perspective

Neng, Long Hii and Evan, Lau (2024) Role of Labor Market Education Quality in Driving Economic Growth and Value-Added Agriculture : A Malaysian Perspective. Thailand and The World Economy, 42 (3). pp. 186-211. ISSN 2651-0529

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Abstract

This paper examines the impacts of the labor market’s educational quality on value-added agriculture and economic growth in Malaysia during the period 1982-2019, using the VAR Granger causality test, variance decomposition, and impulse response function (IRF). The paper explores how educational attainment, and foreign workers affect value-added agriculture and economic growth. The empirical results of Model 1 (meso) reveal the existence of unidirectional causality running from no formal education to value-added agriculture. The IRF further underscores that no formal education negatively affects value-added agriculture in 50 years, whereas attaining a tertiary education positively impacts value-added agriculture, but no causality exists during the study period. The IRF also underlines the fact that employing foreign workers had an adverse impact on value-added agriculture over 50 years, although no causality existed between 1982-2019. Additionally, Model 2 (macro) shows there is a unidirectional causality running from secondary education to agricultural GDP and from tertiary education to agricultural GDP. The IRF affirms that tertiary education will positively impact agricultural GDP in 50 years. Surprisingly, the graph exhibits that the significantly positive effect of tertiary education diminished the negative effect of secondary education on agricultural GDP in the first five years. The findings demonstrate that there is a need to hasten the transformation of agriculture towards high-skilled labor to expand its production output.

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