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.
Highlights
Education can increase the human capital of the labor force, which will improve labor productivity growth and higher levels of economic growth [3]
The following methods have been applied in the study, including Levin, Lin & Chu test (LLC), ImPesaran and Shin W-stat test (IPS), ADF-Fisher Chi-square test (Fisher-ADF), and PP-Fisher Chi-square test (PP-ADF)
This study uses the individual fixed effect variable intercept model to make an empirical analysis on the relationship between educational investment and the growth of economy of different cities in Guangdong province
Summary
Education can increase the human capital of the labor force, which will improve labor productivity growth and higher levels of economic growth [3]. Education can create a class of educated leaders to fill vacancies in governmental services, public corporations, private domestic and foreign businesses, and professions [4]. After thirty years of reform and opening, as the bellwether, Guangdong province has made remarkable achievements in economic development. It is obvious that Guangdong province made full use of its superior geographical position, special policy support, foreign trade advantage, and other favorable factors to create its brilliant achievement. Some people ignore the effect of education in promoting economic growth, especially the contribution of the educational investment to the economic development in Guangdong province. Even though alternative investments in the economy could have generated greater growth, this would not detract from the important contributions, noneconomic as well as economic, that education can make and has made to promoting aggregate economic growth [4]
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