Can Financial Shortages in China’s Education Be Contagious?

Abstract

The full models are estimated by spatial econometric models using county-level data from 1513 Chinese counties. The results indicate the existence of spatial contagion effects among local governments with respect to spending on local education. Financial shortages in education tend to be contagious; they affect counties or regions in geographic proximity. Contagion occurs due to three different fundamental causes: Intergovernmental competition, political economy and neighborhood watch. The possibility of contagion depends strongly on education investment, financial and economic conditions, cultural diversity, urban/rural distribution, and population structure. Poor counties are much more likely to become "infected" by neighboring financial behavior in education. The empirical evidence suggests that the speed of contagion is faster in economically underdeveloped areas than in economically developed areas.