Education, Institutions, and Investment as Determinants of Economic Growth in Central Asia and the Caucasus: A Panel Data Analysis

Comments 1: The title do not fully and accurately reflect the content of the paper (in addition to education and institutional factors, the authors examine the impact of capital investment and labor on economic development or economic growth. The author(s) do not distinguish between economic development and economic growth.

Response 1: Thank you for pointing this out. We agree with this comment. Therefore, we have revised the title to better reflect the scope of our study. This ensures alignment between the study’s scope and its title, accurately reflecting the variables analyzed. (lines 2-4)

Comments 2: The abstract do not contain a clearly defined goal, the methods and techniques that were used, the time period of research, an overview of the main results, the contribution of the paper to science, as well as an explanation of how much that contribution is. In other words, the author(s) should explain why it is important for the scientific public and society to find out the results of this research. Also, a sentence or two about the socio and economic foundation (a broader context) of the research should be integrated into the abstract.

Response 2: Thank you for pointing this out. We acknowledge the need for a more structured abstract and have revised it accordingly. The updated abstract now explicitly outlines the research objective, the methodology applied (panel data analysis using FMOLS and DOLS), the study period (2010–2023), key findings (education and capital investment positively drive growth, while institutional factors have mixed effects), and its contribution to the literature (empirical evidence on institutional influence in economic performance). These changes provide a more comprehensive summary of the study. (lines 5-17)

Comments 3: Keywords have the function to, in addition to the words from the title of the paper, enable a quick and accurate search in the literature databases. The words which are contained in the title, abbreviations as well as very general terms (Economic Development, Innovation) should not be entered in keywords.

Response 3: Thank you for pointing this out. We have refined our keyword selection by removing redundant and overly general terms while incorporating more precise terminology relevant to the study’s focus. (lines 18-20)

Comment 4: In the last paragraph, should explain why this paper represents a significant contribution to science; what new does this paper enter to science?: new, previously unknown, material, a new original research method, a new approach to the topic, a new viewpoint from which she is observed and treated. Also, a paragraph on the organization of the paper is missing.

Response 4: Thank you for pointing this out. We have added a paragraph discussing the novelty of our study, emphasizing its methodological contributions and practical implications. Also, we have added a paragraph on the organization of the paper. (lines 50-65)

Comment 5: See the word “developed” in row 159. Find a more adequate synonym for this word, for example, “prepared”.

Response 5: Thank you for pointing this out. The suggested revision has been implemented. The term "developed" has been replaced with "prepared." (line 175)

Comment 6: This is an arbitrary interpretation. You have not indicator that which explicitly refers to education in Figure 1. “The dynamics of GDP per capita emphasizes the importance of strategies aimed at diversifying the economy, increasing the level of investment in hu man capital and education” (rows 185-187).

Response 6: Thank you for pointing this out.

Comment 7: These sentences should be expressed more clearly, precisely and concisely.

“In countries with stable indicators WHICH INDICATORS EXACTLY? (e.g. Kazakhstan), the effectiveness of measures aimed at developing the economy and improving the quality of life is observed”.

Response 7: Thank you for pointing this out. We have rewritten these sentences to provide a clearer. (lines 203-205)

Comment 8: I think that this term “sustainability of public expenditures“ (line 201) is not familiar to the average reader, including a researcher who is not in the narrow field of the paper's topic, and therefore it needs to be defined or explained.

Response 8: Thank you for pointing this out. A definition has been added to ensure clarity. (lines 217-220)

Comment 9: A more adequate term is “permanent“ or “continuous" support for the education system (line 206).

Response 9: Thank you for pointing this out. The terminology has been revised accordingly. (line 225)

Comment 10: The end of the sentence, you should cite papers from the literature that confirm this. “Lower allocations, such as those observed in Armenia, may have long-term implications for economic growth and the development of human capital, potentially limiting the country's competitiveness and innovation capacity“ (lines 216-219).

Response 10: Thank you for pointing this out. We have added relevant references to support the argument that reductions in education expenditure can negatively impact human capital development and economic competitiveness. (lines 235-238)

Comment 11: You should cite more sources on pages 5-10. Today, authors use 20 or 30 sources (or references) for scientific review article. Often and more!

Response 11: Thank you for pointing this out. Additional citations have been incorporated to reinforce the discussion on education’s role in economic growth.

Comment 12: I think that the text about gross capital investment is not relevant to the topic of the paper and it is: the impact of education quality and institutional factors on economic development. This part of the paper must not contain facts and thoughts that go beyond the framework of the topic and are not directly related to it. The unity of the paper will be disrupted as soon as a new topic is introduced into it.

Response 12: Thank you for pointing this out. The article reflects the positive impact of education (especially enrollment rate) and capital, and emphasizes the importance of the institutional environment. Gross capital investment turned out to be a significant factor. According to the comments, the title of the article was changed and investments were reflected.

Comment 13: The analysis of gross capital investment does not correspond to the data available in Figure 3. Conclusions are made arbitrarily, not based on the data (see lines 242 -249).

Response 13: Thank you for pointing this out. The discrepancies between the text and Figure 3 have been corrected to ensure consistency. (lines 253-261)

Comment 14: A more adequate term is “continuous“ demographic expansion (line 261).

Response 14: Thank you for pointing this out. The phrase has been updated to "continuous demographic expansion." (line 281)

Comment 15: Cite the source, i.e. the author who stated this.

“Countries experiencing labor force expansion, such as Uzbekistan and Kazakhstan, have the potential to enhance economic productivity and efficiency by equipping their workforce with the necessary skills and investing in education.” (lines 272-275).

Response 15: Thank you for pointing this out. We have provided a relevant source to substantiate this claim. (lines 292-295)

Comment 16: Better formulate this sentence.

“One of the most significant indicators is tertiary education enrollment, which measures participation rates in secondary? and higher education.” (line 280)

Response 16: Thank you for pointing this out. The new version now correctly. (lines 299-300)

Comment 17: This sentence cannot remain like this... The aim of the research is to examine the influence of institutional factors on economic development.

“Secondly, there are institutional factors affecting the quality of education, including” (line 294)

Response 17: Thank you for pointing this out. The sentence has been revised to align with the study's main objective, explicitly stating that the research focuses on assessing how institutional factors influence economic development in Central Asia and the Caucasus. (lines 314-325)

Comment 18: These paragraphs are too short. ... Frequent paragraphs that are too short are evidence of poor synthesis. „The effectiveness of public administration – the level of organization and control over the educational system. Corruption control is the degree of transparency of financial flows and the absence of corruption schemes in education. Political stability is the creation of favorable conditions for the functioning of educational institutions. The quality of regulation is the ability of the state to implement effective educational reforms.“ (lines 295-304).

Response 18: Thank you for pointing this out. We have combined the paragraphs into a cohesive discussion, integrating the explanations of public administration, corruption control, political stability, and regulatory quality into a well-structured paragraph. (lines 378-400)

Comment 19: I think this should be deleted.

„Thirdly, economic indicators that affect the quality of higher education, including:

The share of government spending on education in GDP, which reflects the level of financing of the educational system. Gross capital accumulation, which serves as an indicator of investments in the infrastructure of higher education institutions and their technical equipment.“ (lines 307-311)

Response 19: Thank you for pointing this out. We have removed this paragraph to maintain the thematic coherence of the study.

Comment 20: Into paragraph 341-346, the connection between institutions and the economic development of the observed countries should be explained.

Response 20: Thank you for pointing this out. We have expanded this section to clearly demonstrate how strong institutions contribute to economic stability, investment security, and long-term development.

Comment 21: In the previous text, it was not explained what “the share of higher education coverage” and “sustainable economic development” is?

Response 21: Thank you for pointing this out. We have added clear definitions of these terms in the manuscript to improve clarity.

Comment 22: A transitional paragraph of 2 or 3 sentences between the sections “An Empirical Study Based on Data” and “Methodology” is missing.

Response 22: Thank you for pointing this out. A transitional paragraph has been added to create a smoother flow between these sections. (lines 401-408)

Comment 23: The aim of the paper is defined differently in the abstract. (row 355)

Response 23: Thank you for pointing this out. The aim has been standardized across all sections for consistency. (lines 410-417)

Comment 24: Delete. Redundant. “Statistical methods and tools: The data from this study 364 will be analyzed using the panel data method.”

Response 24: Thank you for pointing this out. The sentence has been removed.

Comment 25: In the paragraph 376-384, K is missing.

Response 25: Thank you for pointing this out. We add. (lines 334-442)

Comment 26: It was not explained what "education costs” is? (row 391).

Response 26: Thank you for pointing this out. A definition has been provided to clarify its meaning. (lines 448-450)

Comment 27: You are stating definition of panel data without any reference to literature (at least indirectly). (393-394)

Response 27: Thank you for pointing this out. We have added citations to support the definition. (lines 462-463)

Comment 28: Avoid unnecessary information. Always keep in mind the principle that what is of no use is harmful (lines 398-406).

Response 28: Thank you for pointing this out. We have streamlined this section to remove irrelevant details while maintaining essential information.

Comment 29: What is „GDP growth“ in table 1?, I did not see it explained anywhere in the previous text. Instead of "Table 1. Panel unit root test", you should write "Table 1. Panel unit root tests".

Response 29: Thank you for pointing this out. We have added a definition of GDP growth in parentheses and corrected the table title. (line 518)

Comment 30: Important information about research instruments (Pedroni test, Kao test, FMOLS and DOLS) is missing. Please, see following papers:

For Pedroni and Kao test

- Khan, H. H., & Rahmat, S. R. (2021). Investigating the Dynamic Impact of FDI Inflows and Economic Growth on Environmental Degradation: Evidence From FMOLS and DOLS for Selected Asian Countries1. Russ.). DOI, 10, 1996-78452021. (page 9, paragraph 1)

For FMOLS and DOLS

- Алехин, Б. И. (2023). Монетарная бедность и образование в России. Финансовый журнал, 15(4), 43-62. (pages 13 and 14)

This part of the Methodology needs further development.

Response 30:

The methodology was be more changed according to the comments.

Comment 31: Please insert p-value in table 1. Conclusions are made arbitrarily, not based on the results of statistical analysis. Please provide screenshots of all the tables in the program that was used for the statistical processing of the data.

Response 31: Thank you for pointing this out. We agree with this comment. Therefore, we add. (line 518)

Comment 32: FMOLS and DOLS results were misinterpreted.

This is correct:

Indeed, the School enrollment coefficient shows that an increase of 1% will increase economic growth by between 0.09 and 0.17% in the long term through FMOLS and DOLS, respectively.

Response 32: Thank you for pointing this out. We agree with this comment. Therefore, we changed. (lines 551-553)

Comment 33: You should write below tables 1, 2 and 3:

Source: Author’s calculations with Eviews, STATA, R ?...

Response 33: Thank you for pointing this out. We agree with this comment. Therefore, we add (Eviews).

Comment 34: Policy Implications and Future Directions are repeated twice.

Response 34: Thank you for pointing this out. We have removed the redundant section.

Comments 1: The literature review is done on the issue of educational investment and economic growth. The second subsection (2.2) is not a literature review per se. It is just a statistical analysis of some macroeconomic indicators for several countries. It would be better if they were treated somehow separately. Basically, it is a punctual presentation (based on specific indicators related to the topic) of the countries selected for the analysis to be carried out.

Response 1: Thank you for pointing this out. We agree with this comment. Therefore, we have restructured the section by clearly distinguishing between the literature review and the statistical analysis. Subsection 2.2 is now introduced separately. (line 163)

Comments 2: The results could be more detailed. It would be good to discuss certain concrete aspects of the economic and social reality of the analysed states. In this regard, a possible starting point for this approach may be the presentation (at the level of the eight states) provided in sub-section 2.2.

Response 2: Thank you for pointing this out. We agree with this suggestion and have expanded the discussion of the results by incorporating additional insights into the economic and social contexts of the analyzed states. We have integrated relevant discussions from subsection 2.2, highlighting key trends and differences across countries.

Comments 3: The graphical representations (Figures 1-6) should also contain the unit of measure used - on the vertical axis (US dollars, percent of ..., percentage points, etc.).

Response 3: Thank you for pointing this out. We have revised all graphical representations (Figures 1-6) to ensure that the units of measurement are explicitly stated on the vertical axes.

Comments 4: The conclusions are rather extensive. It might be helpful if the policy implications and research directions mentioned in the conclusions were better highlighted by marking them as subsections or in some other form.

Response 4: Thank you for pointing this out. We have changed the conclusion to improve readability.

Comments 1: I found the submitted paper well written and based on sufficient research, both the literature review as well as econometric model. I especially agree with the recommendations and conclusions, where one hopes those who the message is aimed at, will read. There is of course still many open questions related to the investment in education, particularly with regard to the labor market. If the economy of the country is not developing at sufficiently high rate, the country may face a problem with over-educated labor not being able to find employment at home. The issue of potential brain-drain of highly educated needs to be addressed appropriately by the policy-makers. Here more research on how to balance the "output" of the educational sector with the requirements and ability of the country to use the highly trained people is needed. This issue can be additionally highlighted by the authors in the concluding section.

Response 1: Thank you for pointing this out. We agree with this comment. Therefore, we have revised the conclusion