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A Study on the Externality of Local Government’s Financial General Education Investment and Relative Suggestions

Author: HanWenZuo
Tutor: ZhangXuKun
School: Zhejiang Technology and Business University
Course: Industrial Economics
Keywords: Education investment General education Externality Human capital Interregional transfer
CLC: F812.45
Type: Master's thesis
Year: 2010
Downloads: 97
Quote: 0
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Abstract


Education investment can be the resources of national wealth and public demand; they have positive externality to the society. In China, educational system presents a structure of district binary system, to carry out "belong to person’s principle", that is to say local public education resources are open to local residents only, and these resources reject the people who are not local residents. However, in national accounting we carry out "belong to a ground’s principle". Under this educational system, the flow of labor force between the cities will produce educational externality. Brain drain has lead to the low rate of education investment return in some less developed areas. The low rate of return will influence the enthusiasm of local government’s education investment in these areas. And then restrict the development of the economy in these less developed areas. In addition, as opposed to the less developed areas, developed areas have more advanced technique, more advanced teaching skills, moreover, and these areas have the advantages to attract all kinds of talented person. Therefore, developed areas have more power to develop education better. In course of development in developed areas, advanced technique, scientific teaching mode and perfectly knowledge system will produce strong radiating capacity to those areas which have less developed. In knowledge-based economy, spillover effects on less developed areas will cause positive externality.Based on the above mentioned externality, by using New Growth Theory and The Human Capital Theory, this paper conducts an empirical analysis of the positive externality of local government’s education investment by making use of the differences between different areas. Through the contrast between different areas which have different level in economic development, we can find out the positive externality of local government’s education investment directly through data. Afterwards, according to the empirical analysis, we discuss that how to share the educational expenditure between central government and local government. Meanwhile, we discuss the structure of educational expenditure.Chapter one to chapter three are based on the result of empirical analysis to discuss the reason of positive externality by revolving around the issue of general education investment. In addition, through the contrast between France, America and Japan, we make a study on the current situation in such developed country, then we can discover the experience and lessons which we want to learn from them. At the end of this paper, refine some suggestions which are suitable for our country.In the most documents which are about the positive externality of education investment, they always use the theoretical analysis to analyze this problem. However, in this paper I use empirical analysis to analyze. The country have been divided into three parts to carry out the empirical analysis, there are the western, central and eastern regions. Then according to several typical provinces’empirical analysis I can support my view which have mentioned before. This kind of analyzing method can make the process more direct and clear. In addition, the suggestions may provide some references to the development of education and the education expenditure reform.How to solve the externality? Reform the education investment system may works. Based on the empirical analysis, this paper analyzes the path of the reform from two points of view, one way of education investment, the other policy. After the contrast between some developed countries, we can found that in our country, we have a problem in the education expenditure system, that is, the centre of gravity is too low. This kind system will lead to the low efficiency of the using of education investment; moreover, it will also lead to enlarge the difference between different regions. Based on this, I offer a new system. That is, put the centre of gravity higher; enlarge the responsibility of central government and provinces, differentiated responsibility of education investment. Those can be some relative suggestions of how to solve the externality of local government’s education investment.

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CLC: > Economic > Fiscal, monetary > Finance, the state's financial > China's financial > Financial income and expenditure > Expenditure
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