Education And Economic Growth: Theoretical Analysis And Empirical Research From The Perspective Of Externality

In the framework of endogenous growth theory, from the perspective ofexternality, this paper investigates the education and economic growthproblems in China, more accurately speaking, it studies the micro mechanismand functional channel through which education affects economic growth, andit also discusses government’s education policy problems.The main parts of this thesis are trying to answer the following questions:(1) Under the condition of the existence of human capital externality, whetherthe economy can achieve sustainable economic growth or not? What’s themicro mechanism that education affects economic growth? What’s the role ofgovernment’s education policy concerning the above question?(2) In thepresence of knowledge externality, what are the specific requirements that theeconomy can achieve sustainable growth? Through which function mechanismdoes education affect economic growth? How should the government behavein this case?(3) What’s the relationship between China’s education andeconomic growth? Does it exhibit significant differences in various regions?What are the functions of human capital externality and knowledge externalityin it? How to make tradeoffs between our education expenditure and subsidy?As for the first question, our research reveals that: First of all, themagnitude of human capital externality, the height of knowledge spillover levelwill affect the steady-state growth rate of the balanced growth path; Secondly,mainly through accumulating human capital which exhibits externality doeseducation affect the representative household’s resource allocation behavior inthe micro level, that is, the allocation of time endowment, and it further affectsthe country’s macro economic growth rate; Thirdly, because of the existence ofhuman capital externality and knowledge spillover, the decentralized economyequilibrium couldn’t achieve the society’s optimal state, through implementinglump-sum output taxation, education tax or subsidy can the government induce the decentralized economy to attain the society’s sustainable optimal state.When it comes to the second question, our study shows that: firstly, in thepresence of knowledge externality, the requirement that the technologyinnovation rate and education department’s productivity must be greater thanhousehold’s subjective time preference and marginal utility elasticity parameterin economy is the key to attain sustainable economic growth for a country;Secondly, the development of education can increase the stock of humancapital in economy, and this will enhance the output of research anddevelopment department as well as that of the final output sector, which resultsin promoting economic growth; Thirdly, education, knowledge and humancapital are important factors that determine economic growth, the governmentshould create, improve and guarantee an policy environment in whichknowledge property is recognized and innovation is greatly encouraged, sothat the economy will be induced to sustainable economic growth.As far as the third problem is concerned, our investigation tells that: Firstof all, there is a long-term stable relationship between our country’s educationand economic growth; Secondly, the relationship between education andeconomic growth exhibits different performances, because of the mobility ofeducated people and the regional convergence of enterprises, educationrestrains the economic growth of some provinces in middle and western areas,but it promotes most provinces’ economic growth in eastern regions; Thirdly,the magnitude of China’s public education expenditure and subsidy should becontinuously enlarged, meanwhile, the government should reasonably allocateits education expenditure and subsidy among primary education, secondaryeducation and high education.