Higher Education and Productivity in China

Abstract

This paper examines the impact of higher education on total factor productivity in China using province level panel data over the period of 1995-2016. The results show that higher education has a significant U-shaped impact on total factor productivity with a threshold value of 0.323, indicating that higher education development would have a positive impact on total factor productivity after the ratio of college graduates to population exceeds 32.3%. Further analysis reveals that the impact of higher education on total factor productivity is mainly through the Technical Efficiency channel and the Scale Efficiency channel. Moreover, according to the results of the paper, higher education in most provinces of China’s is still below the threshold level, suggesting that developing higher education would be an important policy strategy to promote productivity in China.