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Higher Education, Real Income and Real Investment in China: Evidence From Granger Causality Tests

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  • Paresh Kumar Narayan
  • Russell Smyth

Abstract

This paper employs cointegration and error-correction modelling to test the causal relationship between real income, real investment and tertiary education using data for the People's Republic of China over the period 1952-1999. To proxy tertiary education we use higher education enrolments and higher education graduates in alternative empirical specifications. One of the paper's main findings is that real income, real investment and tertiary education are cointegrated when real investment is the dependent variable, but are not cointegrated when either tertiary education or real income is the dependent variable. We also extend the in-sample analysis to examine the decomposition of variance and impulse response functions.

Suggested Citation

  • Paresh Kumar Narayan & Russell Smyth, 2006. "Higher Education, Real Income and Real Investment in China: Evidence From Granger Causality Tests," Education Economics, Taylor & Francis Journals, vol. 14(1), pages 107-125.
  • Handle: RePEc:taf:edecon:v:14:y:2006:i:1:p:107-125 DOI: 10.1080/09645290500481931
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    References listed on IDEAS

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    1. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
    2. Finnie, Ross & Frenette, Marc, 2003. "Earning differences by major field of study: evidence from three cohorts of recent Canadian graduates," Economics of Education Review, Elsevier, vol. 22(2), pages 179-192, April.
    3. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
    4. David Card, 1993. "Using Geographic Variation in College Proximity to Estimate the Return to Schooling," Working Papers 696, Princeton University, Department of Economics, Industrial Relations Section..
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    Keywords

    China; higher education; economic growth; causality;

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