Growth and parental preference for education in China

Abstract

This study explores the implications of parental preference for education in an innovationdriven growth model that features an interaction between endogenous technological progress and human capital accumulation. Parents invest in children's education partly due to the preference for their children to be educated. We consider a preference parameter that measures the degree of this parental preference for education. We …nd that a society such as China in which parents place a high value on education accumulates more human capital, which is conducive to innovation, but the larger education investment also crowds out resources for R&D investment. As a result, a stronger parental preference for education has an inverted-U e¤ect on the steady-state equilibrium growth rate due to the presence of both positive and negative e¤ects. We also analytically derive the complete transitional path of the equilibrium growth rate and …nd that an increase in the degree of education preference causes an initial negative e¤ect on growth. Furthermore, we explore the robustness of our results in a scale-invariant extension of the model and …nd that although the crowding-out e¤ect of education preference gradually disappears in the long run, it continues to exert a negative e¤ect on the transitional growth rate. Therefore, a society that has a stronger preference for education would have a lower initial growth rate but also a higher long-run growth rate.JEL classi…cation: O30, O40

Culture and stages of economic development

“…All our results hold if individuals also consume in the working age; see Appendix C 5. SeeChu et al (2016) for an extension that allows for public investment in education 6. SeeChu et al (2016) for an extension that allows for multiple channels of bequest.…”

“…where the second equality uses ( 4) and (5). At this stage of development, the economy features only human capital accumulation.…”

“…The formulation is based onChu et al (2016), who however focus on the second stage of development and do not consider the …rst stage 4. All our results hold if individuals also consume in the working age; see Appendix C 5. SeeChu et al (2016) for an extension that allows for public investment in education 6.…”

“…The seminal study by Romer (1990) develops the R&D-based growth model with the development of new products. 1 While Romer (1990) and other early studies do not consider human capital accumulation in the R&Dbased growth model, subsequent studies introduce human capital accumulation and explore its implications on innovation; see for example, Eicher (1996), Zeng (1997Zeng ( , 2003, Strulik (2005Strulik ( , 2007, Chu et al (2013Chu et al ( , 2016, Hashimoto and Tabata (2016) and Prettner and Strulik (2016). This study di¤ers from them by considering human capital accumulation and innovation as the main engines of growth at di¤erent stages of development.…”

“…SeeChu et al (2016) for an extension that allows for public investment in education 6. SeeChu et al (2016) for an extension that allows for multiple channels of bequest.…”