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The mediating role of oil returns in relationship between investment in higher education and economic growth: Evidence from Saudi Arabia

DOI: 10.14254/2071789X.2020/13-1/8 ABSTRACT. This study aims to investigate the mediating role of oil returns in the relationship between investment in higher education and economic growth in Saudi Arabia, which has invested in higher education and knowledge creation as part of the sustainable development process. Expenditures on higher education, representing a large part of this country’s budget, aims to develop its educational systems in alignment with the requirements of its development plans. This study initially overviews the trends in expenditure on higher education in Saudi Arabia and then articulates, using unit root, cointegration, granger causality and multiple regression tests, a standard model in which educational investment, as an independent variable, will be regressed against the measures of economic development, as dependent variables, in Saudi Arabia in the period of forty (40) years, since 1978 until 2017. The study model fails to find a mediating role of oil returns in the relationship between investment in higher education and economic growth in Saudi Arabia. Neither did it find that investment in higher education actually generates economic growth in Saudi Arabia. However, it has been found that oil wealth is the engine of investment in higher education.