A Study On The Problems Of Equity And Efficiency Of Education Supply In China

Education is the foundation of a country, a road to a better future. Education input concerns the quality of a population, the prosperity of an economy and the status of a nation. According to the definition by Samulson, education is a kind of quasi-public goods, with elementary education having more traits of public goods and higher education having more traits of private goods. In China, there are different problems in the input of elementary education and that of higher education. Therefore, the study on the input of education must be done separately.On the relation between equity and efficiency, there are generally three viewpoints, i.e., Priority of Efficiency, Priority of Equity, and Balance between Equity and Efficiency. Proponents of Efficiency Priority believe that a free market mechanism with competition leads to efficiency, while too much emphasis on equity leads to welfare loss for the society. In a market economy, social wealth is distributed according to each individual’s endeavor, thus is the fairest allocation method. On the other hand, proponents of Equity Priority believe that the government should interfere with the allocation of income, reduce the gap between the rich and the poor, and equalize their income. The reason lies in that according to the law of diminishing marginal utility, as the income increases, the marginal utility reduces. The same amount of income return brings less utility to the rich, and more to the poor. Still, proponents of Balance between Equity and Efficiency believe that efficiency comes at the cost of equity, and equity comes at the cost of efficiency; therefore, none should be precede the other, but both should be emphasized. This paper takes the view that both equity and efficiency are of great importance, but elementary education should focus more on equity, while higher education should focus more on efficiency.Elementary education is more of public goods, with strong externality, therefore should focus more on equity in its input. According to Welfare Economics, social welfare is the function of individual welfare, an equal allocation of resources can increase social welfare due to the law of diminishing returns of marginal utility. The main problem in China’s elementary education lies in the inadequacy and inequity of input. China is offering a nine-year compulsory elementary education, with public schools in a dominant position and private schools providing an alternative. Fund for elementary education mainly comes from local government, with only a small portion from the central government. Since there are great differences in economic development in different regions of China, the education input from each local government differs greatly. Not only the inter-province education input differs greatly, but also the intra-province input. This explains the great differences in the elementary education input between China’s different regions, the imbalance of education input from each level of government, and the lack of elementary educational input. In order to deal with the problem of inadequate fund in elementary education, China has applied a series of policies and made some progress, but some local governments are too lack of funds to enforce these policies. In order to achieve a more equal allocation of education resources, it should be the state government that increases the input to poor regions according to the economic development of different regions. In order to increase the quality of elementary education and the efficiency of input, Friedman brought forth the idea of school voucher. The application of school voucher in elementary education to increase the efficiency of its input should depend on the main problems of that specific region, and the voucher should be adjusted to the specific situations of the region. Private schools, a valuable complement to public schools, offer another choice for students and their parents, and increase the efficiency of elementary education.Higher education is more of a private good, which not only provides benefits for the society, but also brings more returns, such as income, to individuals, therefore the cost of higher education should be shared by individuals and the government. The fund for higher education in China was once offered solely by the state government, and the government even offered allowances for the students to cover some of their living expenses. Now the government and individuals are sharing the higher education cost. Because the increased tuition has become too heavy a burden to some students, students with effective demand may not have equal opportunity to receive higher education. In recent years, it has become more difficult for college graduates to find a satisfying job. To deal with this problem, the input efficiency for higher education must be improved, i.e., to offer subjects and majors according to the demand of the labor market, thus resulting in a more efficient allocation of higher education resources. Many famous universities abroad are private universities. Although their tuition is much higher than that in public schools, they are still well accepted by the public because they offer high quality education. This can be good experience for China to learn from.The purpose of this dissertation is to identify the problems in education input in China, and work out an education input mode to best suit China’s situation. This dissertation makes an effort to answer: why elementary education and higher education should have different focus when concerned with equity and efficiency; how to solve the problems of inadequacy and imbalance of elementary education input; how to increase the efficiency of education resources in elementary education; whether school voucher is suitable for China; how to reduce the financial burden for students after the application of cost sharing in higher education; how to increase efficiency of higher education input; how to increase the funding sources to increase the fund for higher education; how to develop private schools and universities, etc..This dissertation contains 6 parts and a conclusion. First it generalizes the problems in China’s education on the basis of introducing the importance and reason for the choice of this topic. This part also defines the objectives and study scope of this dissertation, as well as some important terms. This part also points out the premises and study method used in this dissertation, as well as some breakthroughs and imperfections.The next part is a summary of related theories and literature review. This part reviews the related theories and the present researches, mainly on public goods theories and social welfare economics, and briefly analyzes the problem of education input to build a foundation for further analysis in the following chapters.The third part is the development and current situation of China’s education input. This part first analyzed several index of education funds, elaborates and analyses the input of elementary education and higher education, and points out the problems in China’s education input. The main problems in elementary education are lack of education input and input imbalance between different regions, urban areas and rural areas, male and female. The main problems of higher education are lack of funds, lack of specialty, low education quality, which cannot meet the demand of the labor market in the society.The fourth part is the experience China can learn from other countries. This part elaborates the education input experience of some other countries, and points out the experience for China to earn from.The fifth part analyses the concepts of education cost, education fund, and education fund-raising, points out that in order to increase the total amount of education supply, there is a need to raise funds through various ways, and then suggests what they are.The sixth part is the renovated suggestions for China’s education input and fundraising. This part first introduces and analyzes a few basic concepts of education, then elaborates the role and function of government in education input. Next, this dissertation gives a detailed introduction of the multiple fundraising method in education, and points out that in order to ensure the adequacy of education fund, other fundraising channels should also be applied besides the government funding. To solve the problem of lack of funds and imbalance of input in elementary education, this dissertation suggests that all methods possible should be applied to raise funds, meanwhile, the "county-based education input mechanism" should be changed to "fund from central government, management from local government mechanism" to ensure the equal opportunity in elementary education. According to the principles in welfare economics, only when equity is realized in elementary education, can social welfare be maximized. Elementary education can realize its efficiency by developing private schools as well as school vouchers. As to the problem of insufficient education funds in higher education and the loose link between supply and demand, this dissertation analyzes two sets of demand and supply related to higher education and analyzes their relations, pointing out that higher education must be oriented with the demand in labor market, so that the graduates are needed by the society and the limited education resources are allocated efficiently. This dissertation also elaborates the many sources for fundraising in higher education, and the ways to lessen students’financial burden, thus realizing equity. In the end, the dissertation points out that a country must develop its education according to its economic situation, and should not surpass the period. In China, the demand for education differs according to the different economic situations of different regions; therefore the focus of education development in different regions should also differ.