Academic journal article Kuram ve Uygulamada Egitim Bilimleri

Higher Education and Productivity in China

Academic journal article Kuram ve Uygulamada Egitim Bilimleri

Higher Education and Productivity in China

Article excerpt

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Higher education plays an important role in both economic and social development, especially for fast-growing developing countries like China. In the twenty-first century, when economic and social development is even more complex, there is an increasing need for more well-educated labour that are best associated with higher education. As a result, the development of higher education and its connections with economic and social development remain to be central issues on the agenda of policymakers. Among these issues, a key issue that is important, but not yet fully resolved, is whether and how higher education may affect productivity thus affect economic growth.

Despite the inadequacy of the literature on a direct examination of the higher education-productivity nexus, a large strand of literature has discussed the role of human capital in economy growth, where education is considered as an important form of human capital. In an early study, Nelson and Phelps (1966) argue that human capital's impact on total factor productivity contributes to economic growth. In the study of Mankiw, Romer, Weil, (1992), the accumulation of human capital has a positive effect on economic growth. As regards the empirical literature, however, the results are somewhat mixed (Barro, 1991; Mankiw et al, 1992; Benhabib and Spiegel, 1994; Nasrul, 1995; Pritchett, 2001). According to Temple (1999) and Rogers (2008), differences in education quality, specific characteristics and market structures across countries may play a role in the uncertain effect of human capital on economic growth. Other explanations include data reasons like misspecification and measurement error and lack of data quality, especially for the transition economies (Benhabib and Spiegel, 1994; Hanushek and Kimko, 2000; Krueger and Lindahl, 2001; Cohen and Soto, 2007; Ahsan and Haque, 2017). In the study of Romer (1990), the level of human capital can explain the economic growth for higher level of human capital enhance productivity, while the improvement of basic knowledge like literacy rate only plays a limited role. Hansen (1999) also confirms that, the positive impact of human capital on growth only occurs when the economy develops into a certain level. Levin (1991) provide possible ways that higher education may have a positive impact on productivity for given resource levels. Benhabib and Spiegel (1994) find that education affects technology improvement and results in changes in economic growth. Kremer, Bick, & Nautz (2013) extends Hansen's model by using dynamic panel data model. In the study of Schündeln and Playforth (2014), social returns to human capital should also be taken into consideration.

To assess the effect of human capital on economic growth, different estimation methods and data sets have been used in the existing literature. In the study of Krueger and Lindahl (2001), initial level of education significantly affects growth in low and middle income countries, but this does not hold in developed countries. Yao and Zhang (2001) use province-level panel data model and find that human capital is positively associated with economic growth. In the study of Ding and Knight (2011), the authors use Generalized Method of Moments (GMM) method to examine the effects of human capital accumulation on economic growth and confirm a positive effect of human capital on economic growth. However, the cross-section regressions in Chen and Fleisher (1996) and the panel estimations in Wei, Liu, Song, & Romilly (2001), Chi (2008) and Li, Lai, Wang, & Zhao (2016) do not find significant impacts of human capital on economic growth. As for the relationship among human capital, productivity and economic growth in China, a direct examination of how higher education may affect total factor productivity seems to be largely absent, although there are studies showing that higher education leads to a large gap in regional growth rate (Chen and Fleisher, 1996; Fleisher and Chen, 1997; Demurger, 2001), or that higher educated workers contributes to higher marginal products (Fleisher and Wang, 2004; Fleisher et al, 2006), or that higher education contributes to economic growth (Song, 2018; Zhang and Zhuang, 2011). …

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