Adjustment And Optimization Of The Level Structure Of The Chinese Government Investment In Education

Scholars like Lucas, Arrow, pundit of endogenous growth theory, have proved that human capital accumulation plays an important role in the course of economic growth in both theoretical and empirical perspective since 1980s. Education has been considered as the best way to improve the labor quality. Investment in education has promoted economic development by improving labor productivity. James Heckman, a Nobel laureate in Economics in 2000, gave a speech entitled"China's human capital investment"at Peking University, and pointed out that returns of educational investment was up to 30% -40%.Since the policy of reform and opening up took effects, the share of the tertiary industry in GDP has showed a clear upward trend, while the share of the first industry significantly lower. These adjustments of industrial structure have sparked great economic development in the past decades. It has no doubt that the industrial structure will enter the stage during which the tertiary sector will play a leading role in the process of development. Given the contribution of education to economic growth, it is very vital to conduct this study to find out what policies the government should apply to the investment structure of education industry.According to the theories of the Economics of Education and Industrial Economics, investment in education affects the industrial structure through the improvement of labor quality and R&D of science and technology, so adjusting the structure of education investment would certainly exert profound effects on the industrial structure. This paper focuses on the forward linkage effects of education industry on the tertiary industry, tries to figure out how the government investment in primary, secondary and higher education influences the industrial structure respectively. Data from 1980-2008 have been examined. Only the government investment in higher education demonstrates insignificance. This study shows that the government investment in primary education is disadvantageous, while the government investment in secondary education is advantageous. This paper recommends raising the government investment in secondary education, especially by a high teacher-student ratio.