The Impact of Educational Investment on Sustainable Economic Growth in Guangdong, China: A Cointegration and Causality Analysis

Abstract

Education, as an investment in human capital, is regarded as an important determinant of sustainable economic growth [1,2]. The purpose of this study is to explore the cointegration and causality between the investment in education and sustainable economic growth in Guangdong province by using the panel data of 21 cities from 2000 to 2016. We construct a variable intercept panel data model with an individual fixed effect based on the Cobb-Douglas production function, estimating the contribution of the investment in education to economic growth by introducing lags. The findings show the existence of the feedback causality between education and sustainable economic growth. Also, the results reveal that the local financial investment in education plays a positive and statistically significant role in promoting sustainable economic growth. However, the contribution of the local financial investment in education to economic growth varies in different areas. The investment in education in the Pearl River Delta region have the most obvious pull effects on its regional economy, whereas the Western region takes the second place. Meanwhile, the local financial investment in education for its role in promoting economic growth obviously has a two-year hysteresis effect. These findings have important implications for Guangdong’s solution to the imbalance between regional educational investment and sustainable economic growth.

The Impact of Higher Education on Economic Growth in ASEAN-5 Countries

“…In addition, many studies have also focused on the role of investment in education and the educational quality. For example, Keller [8] and more recently Liao, Du, Wang, and Yu [13] have considered the role of educational investment in economic growth. They examined this hypothesis in Guangdong, China and found that personal financial investment in education has a positive role in enhancing economic growth, but the magnitude of the impact can vary in different areas.…”

“…In the recent decade, the existing literature has broadly discussed the relationship between education and economic growth. Many investigations have revealed that education has a potential effect on economic growth (see, e.g., [10][11][12][13]). Existing studies mainly use linear models of education's impacts on economic growth, which may be a good approximation and conform with many theoretical approaches.…”

“…The investigation of the nonlinear relationship between these two variables is quite limited. Only a few studies focus on nonlinearities [9][10][11][12][13]. One of the recent works on this issue, Maneejuk, Yamaka, and Sriboonchitta [14] points out that the linear model may overlook a significant nonlinear relationship.…”

Parental Involvement in Education Among Urban Families in Malaysia

“…Two third of Gross Domestic Product (GDP) growth is explained by cognitive skills of the population (Hanushek, Weissman, Jamison, & Jamison, 2008). The empirical evidences of positive contribution of education on the economy were also supported by McMahon (1998), Asteriou and Agiomirgianakis (2001), Petrakis and Stamatakis (2002), Self and Grabowski (2003;, Lin (2003;, Dickens, Sawmill and Tebbs (2006), The International Institute for Applied Systems Analysis (IIASA) (2008), Aghion, Boustan, Hoxby, and Vandenbussche (2009), Barro (2013), Pegkas (2014), and Liao, Du, Wang, and Yu (2019) among others. Education is also an essential mechanism to eradicate poverty as the probability of escaping poverty is associated with an increase in education (Patel, 2014).…”

Female Education Externality and Inclusive Growth

“…Lin [14] studied the case of Taiwan and shows that education had a significantly positive impact on economic growth over the period of 1965-2000. Using panel data from 2000 to 2016 on Guangdong Province in China, Liao et al [15] demonstrated that local financial investment in education results in a statistically significant positive impact on sustainable economic growth. Diebolt and Hippe [16] focused on the long-run consequence of human capital on economic development and demonstrate how the past regional human capital contributes to rationalizing the current disparities in economic development in Europe.…”