Research On The Relationship Between The Public Expenditure On Higher Education And Income Distribution

The development of higher education and income gap are now two kinds of significant social phenomena in China, accompanying with the expansion of higher education, the public expenditure on higher education is increasing in the absolute size while decreasing in the relative size.This paper will analyze the correlation between public expenditure on higher education and income distribution.On the basis of human capital theory, we theoretically analyze the impacts of rate of return to higher education and the distribution of public expenditure on higher education on income distribution respectively. From the former point of view, because the rate of return to human capital investment is bigger than that to physical capital, so the growth of investment in education can reduce the income gap. While from the perspective of the latter, in the early stages of development of higher education, the distribution of public expenditure on higher education is unbalance, coupled with the fact that income level is closely related with education level, therefore, the public investment in higher education will widen the income gap; With the popularization of higher education, as people from all income levels can enjoy the benefits of public expenditure on higher education, coupled with the law of diminishing return on investment in higher education, the public input to higher education will reduce the income gap. So, in fact, the ultimate impact of public expenditure on higher education on income disparity depends on the combined effect of above factors.Then we do an empirical research to test the current relationship between higher education expenditure and income inequality in China, with panel data of 1997-2005from 20 provinces. The findings are:At present in China, there is a inverted U-shaped relationship between the government expenditure on higher education and income gap, this non-linear relationship is the result of the combined effect mentioned above. Finally, based on the results of the article, we propose some recommendations from the perspective of public expenditure on higher education to improve relevant financial policies on education, making it an effective means of narrowing the income gap.