Do educated leaders matter in economic growth and development? Evidence from two countries

This paper uses both theoretical and empirical analysis to answer the question whether educated leaders matter in economic growth and development because knowledgeable leadership is one of the fundamental causes of the differences in per capita real gross domestic product (GDP) growth among countries. Our theoretical analysis draws from the theory of signaling or screening, which considers education as a signaling device that separates low productivity workers from high productivity workers in the labor market. Applying this concept to the educated leader and economic growth nexus, we classify educated leaders into two categories. The first category consists of less educated leaders with no baccalaureate degrees; and the second category consists of highly educated leaders with baccalaureate degrees and above. Essentially, baccalaureate degree is the separating equilibrium between the less educated and highly educated leaders. The main contention of this study is that the less educated leaders govern under mediocrity and that the highly educated leaders govern under meritocracy; therefore, these leaders signal different economic growth paths during their tenure as political leaders at the national (presidents and/or prime ministers), state (governors and lieutenant governors), and local (mayors and deputy mayors) levels of government. To verify this assertion, we examine two countries (Central African Republic, 1960-2016; and Singapore, 1965-2016) located within the same tropical geographical climate but from two different continents (Africa and Asia). We chose these two countries to control for the geography, endowments, and institutions hypotheses frequently used by growth theorists to explain differences in growth between countries. We compiled historical data of leaders’ educational attainments in both countries, which we included as one of the functional explanatory variables in the neoclassical growth model. We found that the Central African Republic was governed by less educated leaders for more than five decades in comparison to Singapore that was governed by highly educated leaders during the same period. We found the mean years of schooling of leaders was statistically and significantly different in both countries, but more importantly, leaders’ educational attainments had a positive and statistically significant effect on economic growth in Singapore, but negative in the Central African Republic. More importantly, our findings confirmed that highly educated leaders matter in economic growth and development.