This study focuses on the role of government higher education funding in building the economic capacity of national economy. Contemporary development and competitiveness of any country crucially depends on innovations. The ability of business to provide them is directly connected with available human capital resources. Government financial support of education ensures human capital development. Government budget funding of education is one of the biggest sources of higher education funding, and thus influences economic prosperity fostering GDP per capita growth. The article purpose is to examine government higher education expenditures impact on GDP per capita growth. The research methodology uses panel data analysis based on R statistics. The data sources are the World Bank and OECD. Literature review reveals methods of education funding and the role of government. Then, five hypotheses are posited that describe possible impact of government education funding on GDP per capita growth. To test them, four models are used. The appropriate model to reveal the government higher education funding role is the fixed-effect model. It validates the strong impact of the share of higher education expenditures in the total government expenditures on the GDP per capita growth.