Children’s Education Choice Bias In Low-income Households And Government’s Response

Education is the process of human capital investment. It helps a lot to drive economic growth of an economy, and therefore education policy is also one of the core policies of the government. Research of education in the long term will be able to solve a series of social problems, and bring economic benefits to individuals and society as a whole.There are 128 million poor people in China currently, which means poor families’education choice and inequity are the main subjects when we do education research. At present, the disposition of China education resource is not optimized. To a certain extent, the fairness of education is influenced by the income inequity of Chinese residents. The current education level of low-income families is significantly low, which are for two main reasons:Firstly, most low-income families are living in rural or remote area, where education facilities are not well equipped and education level is low. Secondly, due to the soaring of education and living cost in the city, urban low-income groups own low education level. Thirdly, the parents in low-income families usually have low education background. They may have short-sighted thoughts and cannot fully foresee the long-term positive influence of education (especially higher education and education with higher quality). More seriously, the widening gap of education may strengthen the economic gap and the other social gaps. In addition, there are also some other problems:E.g. The proportion of college students who are from rural area is too small; The share of education expenditure of each family is too high; Education expenditure in China is too low considering the GDP.In the theoretical part, a hypothesis that poor families tend to choose a lower level of education is proposed, and then a theoretical model is built:families’ education equilibrium choice. The microscopic mechanism of how family income level influence the educational choices are studied, so it can be explained that why low-income families choose a lower education level which is lower than socially optimal level. This paper also presents further study of the microscopic mechanism of interaction and interlocking between income inequity and education inequality, in order to explain the "poverty trap" of low-income families,In the empirical part, using data from 30 provinces of China (excluding Chongqing), education inequality is used as important endogenous variable in the study. First, by using education inequality as endogenous variable and income gap as explanatory variable, regression equation is established. Estimation of the impact of income inequity on education inequality is applied. Then a system of equations to study the nexus of education inequality, income inequality and economic growth in China is established. Then we do the third order of least squares estimate (3SLS). These two empirical studies give the conclusion that the income inequality and on education inequality have positive correlation. And with economic growth, education inequality is widening.This paper also presents the study of the US federal government education financial aid system, which is composed of federal grants, student loans, tax preference and federal work-study program. By drawing on the experience of American education financial aid system, as well as basing on the conclusions of theoretical and empirical part in this paper, we put forward a number of recommendations, including:further optimization of government subsidies for students in need of financial aid, boosting the share of GNP devoted to education spending and adjusting the college tuition; improving assessment system of poor students, when the family income is below the threshold, eliminate certain fees completely or proportionately for them, according to the level of household income; learning from U.S. preferential tax policy, and the endowments the social public welfare organization or individuals donated to non-profit institutions can be excused from taxes; To set a third-party platform for contributions to poor students to help establish the connection between the needy students and social organizations or individuals; providing guarantees for student loans, and taking the risk of the possible lower actual revenue (compare to the expected social revenue), which can apparently encourage commercial banks to participate in student loans, and lower the loan default rates and etc.