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Structural Change Through Public Education Expenditure: Evidence From China

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  • Xun Zhang

Abstract

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)

Suggested Citation

  • Xun Zhang, 2019. "Structural Change Through Public Education Expenditure: Evidence From China," Contemporary Economic Policy, Western Economic Association International, vol. 37(2), pages 366-388, April.
    • Handle: RePEc:bla:coecpo:v:37:y:2019:i:2:p:366-388
    DOI: 10.1111/coep.12408
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    More about this item

    JEL classification:

    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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