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STRUCTURAL CHANGE THROUGH PUBLIC EDUCATION EXPENDITURE: EVIDENCE FROM CHINA
Author(s) -
Zhang Xun
Publication year - 2019
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12408
Subject(s) - china , public expenditure , crowds , economics , labour economics , public sector , empirical evidence , capital expenditure , construct (python library) , aggregate expenditure , public economics , demographic economics , public finance , macroeconomics , finance , economy , philosophy , epistemology , political science , computer science , law , programming language , computer security
Under China's hukou system, I analyze the relationship between public education expenditure and structural change as measured by labor transfer from the agricultural to the industrial sector. I construct a two‐sector general equilibrium model, which shows that in the short term, public education expenditure crowds out industrial capital accumulation and temporarily hinders structural change, but in the long term, public education expenditure permanently reduces rural residents' education costs. An inverted U‐shape relationship implied by the empirical evidence indicates that China's current public education expenditure is far from optimal, suggesting that China should increase it, especially for rural residents. ( JEL I28, O11, O15)