A Comparative Study On Education Expenditure And Economic Growth Of China And OECD Countries

A large number of studies show that education expenditure plays an important role in economic growth. Education expenditure has the function of promoting economic growth directly. As a kind of social investment or consumption expenditure, the increasing of education expenditure will affect economic growth directly. At the same time, the change of education expenditure will affect economic growth through crowding-in effect, crowding-out effect and effect on industrial structure over other investment. In addition, education expenditure has indirect effect or technical effect on economic growth through affecting technical progress or total factor productivity. On the one hand, as the major source of human capital investment, education expenditure promotes human capital accumulation, and then has effect on economic growth. On the other hand, education department has technical spillover effect on non-education department. That is, in possession of higher technology, level of human capital and productivity advantages, consequently the education department has technology spillover effect or technology leading effect on the non-education department, and then it can improve the productivity level and promote economic growth. Based on the analysis of the two paths in which education expenditure affects economic growth, simultaneously, considering of complementarity of factors will affect the education spillover effect, this paper builds an empirical model of education expenditure, education spillover and economic growth. The empirical analysis is based on China provincial panel data from 1987 to 2006 and OECD countries'panel data from 1990 to 2004. The results show that education expenditure has significant positive effect on regional economic growth, and the education department does have technology spillover effect, the spillover effect is affected by internal factors of economics. A country or region's level of human capital and investment of research and development have positive effect on educational spillover effect. In addition, economic openness affects the economic element mobility and marginal effect, so it has an effect on the relationship of educational spillover and economic growth, the effect is positive too. The mutual combination of education spillover and the level of human capital, investment of research and development, economic openness promote the growth of regional economy.