Demand for education in China

Abstract

This paper offers an explanation of the quantitative changes in education spending by the framework of demand analysis, including the changes in the ratio of educational funding to GDP in the period 1991–2002. The income effect is estimated mainly by using cross-provincial data, while time series data are used to estimate the price effect. Changes in government and non-government spending through time can be satisfactorily explained by the income and price effects. Demand for education services in the three levels of primary school, secondary school and higher education, and aggregate demand for all education services are investigated. The relation between income inequality and inequality in education opportunities is briefly discussed. Ten important findings are stated.

Acknowledgements

The impetus of this paper owes much to Gary Becker who questioned the extent of private funding of education in China and to James Heckman who was concerned with the ratio of education spending to GDP and to the ensuing communications with both of them. The authors would like to thank Barry Chiswick, Belton Fleisher and participants of the applied theory seminar at the University of Chicago for helpful comments and the Center for Economic Policy Studies and the Gregory C. Chow Econometric Research Program at Princeton University for financial support in the preparation of this paper.