Download Empirical Analysis on Higher Education Affecting Regional Economic

Empirical Analysis on Higher Education Affecting Regional Economic
Development: A Case of Jiangxi Province
YIN Yahong
School of Finance and Statistics, Jiangxi University of Finance and Economics, Nanchang, Jiangsu,
P.R.China, 330013
[email protected]
Abstract: The relation between higher education and regional economy is always the key subject of
research on higher education in each country. It will be helpful for higher education and regional
economy to close unify, and enable higher education to promote the development of regional economy.
This paper analyzes it taking Jiangxi province for example by using empirical means of Augment
Dickey-Fuller (ADF) test, co-integration test, Granger causality test and error correction model test, etc.
The result of test indicates that higher education is advantageous to economic growth in Jiangxi, but the
brain drain restricts this function. Therefore, the local government should take preferential measure to
attract domestic and foreign brain and the fund to flow in Jiangxi, and strengthen the effective
interaction between higher education and local economy.
Keywords: Regional Economy, Higher Education, Jiangxi
1 Introduction
Putting education first is a long-range program. Rejuvenating our country through science, technology
and education has been the basic national policy. The competition among nations is mainly the
economical competition, and is also the competition in the developmental level of productive forces. In
a word, it is still the competition in brain, but the brain raised must rely on education. Nowadays, overall
national strength and international competitiveness in a country will more and more lie on the
development of education and the level of knowledge innovation. Therefore, higher education plays an
important role in developing economy.
The research on relation between higher Education and economic development has always received
attention from many domestic scholars. For example, Che Honghua (2003) studied higher education
having a positive effect on regional economy by input-output model. Wang Shoufa (2005) analyzed that
higher education made contribution to economic development and thought that higher education
positively promoted economic growth in China. Yao Yilong and Lin Xiangli (2005) explained that
education had a positive effect on economy of various countries using the correlative data between
higher education and economic growth coming from China, USA, UK, Japan etc. Simultaneously, they
confirmed that between education and output had bidirectional causal relation.
The above scholars mainly studied the relation between higher education and national or regional
economy, but there were few about higher education affecting the development of provincial economy.
Therefore, this paper analyzes higher education affecting the development of regional economy taking
Jiangxi province for example.
2 Promotion of Higher Education on Regional Economy in Terms of Theory
2.1 Higher education provides luxuriant human capital for regional economic development
2.1.1 Higher education providing high-quality labor force for regional economic development
The high-quality labor force is essential to regional economic development. In knowledge economy
conditions, it is human capital and technological advancement to promote economic growth. And human
capital is the essential factor to technological advancement. Without human capital, there is not
technology advancement at all. However, human capital and technological advancement close relate to
higher education. This means that higher education has been the driving force to promote regional
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economic development. Firstly, high-quality labor force can make good use of existing resources.
Secondly, high-quality labor force enables using other resources to overcome certain scarce resources.
Finally, high-quality labor force itself is substitute for natural resource and material capital,
knowledge-intensive production is an evident proof. To successfully realize the modern economic
growth, education, especially higher education should be strengthen. Only this way, can quality of
science and technology of laborer be improved, and limited resources are effectively used so as to
realize rich labor force substituting for scarce natural and social resources.
2.1.2 Higher education is advantageous to controlling regional population growth
It is well known that there is strategic meaning in controlling population growth to regional economic
development; education plays an importance role in controlling population growth. It is obvious that
education has an effect on fertility rate. Parents' education background directly affects fertility rate. The
higher parents' education background is, the lower the fertility rate is. Contrariwise, the lower parents'
education background is, the higher fertility rate is. Education affecting fertility rate has become the
important factor which restricts the balance of regional economic development in China to a certain
extent. Generally, the more education develops in an area, the higher the quality of labor force is, and
the lower fertility rate is. Correspondingly, economic development is also higher.
Accordingly, with the development of education, especially higher education, a lower fertility rate will
come forth. This will has huge positive effect on regional economic development.
2.2 Higher education impels technological innovation and transforms it into productivity so as to
promote regional economic development
From a global perspective, high-tech industrial park is established in university centralized area and the
high-tech production is vigorously developed, which is principal means to economic development, such
as Standford scientific industry park (Silicon Valley) in USA, Boston industrial park, Tsukuba-Agency
of industrial science and technology centre in Japan, TAEDOK science and technology centre in South
Korea, and so on. Up to 2008, there are 54 state-level economic development zones in China. All of
state-level economic development zones depended on local institutes of higher learning or scientific
research institute. They powerfully promoted local economic development. In 2008, 54 state-level
economic development zone's GDP increased to 1531.5 RMB billion yuan from 462 RMB billion yuan
in 2003. These approximately accounted for 3.5 percent of total GDP in the whole. Guangzhou is 114
RMB billion yuan, Tianjin is 106.6 RMB billion yuan, Suzhou industrial park is 100.2 RMB billion
yuan, respectively. Therefore, the enterprise in cooperation with university is helpful to education
productivity quickly transforming enterprise productivity so as to bring about great economic efficiency.
It is advantageous to the common development of education and regional economy.
2.3 Consumption of higher education is the new economic growth source of regional economic
development
Consumption of higher education drives the development of real estate industry, business, catering
which lie to around universities. This expenditure may promote the development of local economy to a
certain extent. Moreover, with the expansion of ordinary institutions of higher learning scale, each
university is short of hardware facility, especially schoolhouse. Therefore, investment in infrastructure
should be increased. Without a doubt, all of these will make positive contribution to local economic
development so as to promote regional economic development.
3 Empirical Analyses on Higher Education Affecting the Development of Regional
Economy: A Case of Jiangxi Province
3.1 Basic model and data descriptions
New theory of economic growth thought that the primary factors which influenced economic growth
had material capital, human capital and technological innovation. Simultaneously, it also hypothesized
technology advancement was endogenous. Therefore, this paper is taken students enrollment of higher
education (Xs) and expenditure of education (Xf) as the index of higher education in Jiangxi to represent
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the investment of human capital, and investment in fixed assets (Xt) as the investment of material capital.
GDP of Jiangxi is taken as the index of economic growth in Jiangxi. The analysis uses data from the
period 1980 to 2007. All variables are in log-linear form to avoid heteroscedasticy. The whole data
obtains from bureau of statistics of Jiangxi database. Data analysis software uses EViews 5.1.
Consequently, we can express the model as follows:
LnGDP= β0 + β1 LnXs+ β 2 LnXf + β3 LnXt + ε
Where ε is other factors, βi is coefficient estimated.
3.2 Empirical analysis
3.2.1 Unit root test
Generally, the false regression should occur if we use time series variables which are instable to carry on
regression. Therefore, we should have unit root test to ensure the stationary of each variable at first. In
this paper the Augment Dickey-Fuller (ADF) test is used to determine whether the individual variable
has unit root. The results of the unit root test are given in table 1.
According to the result from table 1, all of variables in level can not refuse the null hypothesis that they
have a unit root, which indicates they are non-stationary series, but all the second difference of them are
stationary series at 1% or 10% significance level(except LnXt) . That is all the variables are I (2) except
that LnXt is I(1).
，
Variable
LnGDP
∆LnGDP -1
Ln Xs
（）
（ ）
∆Ln Xs − 1
Ln x f
（ ）
∆Ln x f − 1
Ln x t
∆Ln xt
Table 1 Unit Root Test Result, 1980-2007
Testing ADF
1% Critical value
5% Critical value
-2.7148 (C,T,2)
-4.3561
-3.5950
-3.7495(C,0,3)*
-4.3743
-3.6032
-1.5021(C,T,2)
-4.3743
-3.6032
-3.7495(C,0,5)* *
-2.6243
-1.9498
-4.3943
-3.6122
-1.3188 C,T,2)
-7.9545(C,0,3)* *
-4.4164
-3.6220
10% Critical value
-3.2335
-3.2380
-3.2380
-1.6204
-3.2431
-3.2486
-2.0764(C,T,3)
-4.6920(C,0,2)* *
-3.2335
-3.2335
（
-4.3561
-4.3561
-3.5950
-3.5950
Note: ** stands for rejecting unit root at 1% significance level; * 10% significance level. ∆ stands for the difference.
Three characters in parentheses express intercept, trend, and lag length in the second row, respectively. 0 stands for
no trend.
3.2.2 Co-integration test
To determine if linear combination of all non-stationary variable have long-run equilibrium relation
(co-integration relation), we usually use Johansen co-integration test. The test results are displayed in
table 2.
Table 2 Johansen Co-integration Test Result
Eigenvalue
Trace Statistic
5% Critical Value
Hypothesized
0.653167
55.14244
47.85613
None *
0.527797
28.66966
29.79707
At most 1
0.316345
9.911006
15.49471
At most 2
0.016008
0.403444
3.841466
At most 3
Note Observed series have intercept but no trend, and lags interval (1, 2). * denotes rejection of the hypothesis at
the 0.05 level.
：
﹥
According to the result from table 2, 55.14244 47.85613 indicates that linear combination of all
non-stationary variable have long-run equilibrium relation, namely trace test indicates 1 co-integrating
equation at the 0.05 level.
3.2.3 Granger causality test
Although there is long-run equilibrium relation between these variables, we should test it using Granger
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Causality Test if the causation exists between independent variable and dependent variable. The test
results are displayed in table 3.
Null
Hypothesis
B
A
Table 3 Granger Causality Test
A does not Granger Cause B
B does not Granger Cause A
Ln Xs
Ln x t
Ln x f
Ln Xs
Ln x f
LnGDP
0.04673
0.04745
0.03026
0.88198
0.06608
Note: Lag length of the causality test between LnGDP and LnXs is 6, LnXf is5, and LnXt is 3.
Ln x t
0.05676
、
According to the test result from table 3, we find that (1)LnGDP does not Granger Cause LnXs LnXf
and LnXt are rejected because the possibility is very low (not surpass 5%), which means LnGDP is the
factor affecting these variables. Namely, economic growth leads the expansion of higher education and
the increase of expenditure of higher education as well as investment in fixed assets in Jiangxi. (2) LnXf
and LnXt does not Granger Cause LnGDP are rejected because the possibility is very low (not surpass
10%), but LnXs does not Granger Cause LnGDP is accepted, which shows that LnXf and LnXt are the
factors affecting LnGDP (except LnXs). This indicates that increase of expenditure of higher education
and the expansion of investment scale in fixed assets promote economic growth in Jiangxi, but the
expansion of scale in higher education which is taken students enrollment of higher education as the
index of higher education does not notably promote economic growth in Jiangxi. The reason is possibly
the brain drain, namely most parts of high quality brain trained up by higher education of Jiangxi flow to
other areas and do not make corresponding contribution to Jiangxi's economic growth.
3.2.4 Regression analysis
Since there is long-run equilibrium relation among these variables and the causation exists between
independent variable (except LnXs) and dependent variable, we should carry on regression in OLS on
the basis of the model. Estimated result of model is as follows:
LnGDP =1.077613 + 1.181455 LnXf + 0.448352 LnXt
（10.10567） （-2.01146） （5.963905）
**
*
**①
R =0.852946, R =0.912389, S. E. of regression=0.076614, Durbin-Watson stat=2.05186,
F-statistic=72.50623.
From the test result, we find that each variable passes t-test. S. E. of regression is 0.076614 and
F =72.50623
F0.01 (2, 25) =5.61 indicate that the regression equation is significant at 1% significance
level. R 2 =0.958493 and R 2 =0.952389 mean that the model is very good at the fitted. D.W. is 2.05186. It
indicates that residual of regression model does not exist autocorrelation because of 1.560=du d
du=2.46 at 1% significance level when n =28 k′ =2. Moreover, we carry on unit root test to the
residual of estimated model. The test results are displayed in table 4. According to the test result from
table 4, we find that the residual of estimated model is stationary serial because it does not exist in unit
root at the level so that long-run equilibrium relation among these variables is confirmed.
2
2
﹥
4-
，
﹤﹤
Table 4 Unit Root Test Result of the Residual of Estimated Equation
Testing ADF
1%Critical value
5%Critical value
10%Critical value
-14.720
-3.699871
-2.976263
-2.627420
C,0,2 ***
Note: *** denotes that testing ADF is significant at 1% significance level.
serial
Resid01
（
）
In terms of the above analysis, we can find that each variable has significant effect on economic growth
of Jiangxi because all variables pass t-test and estimated coefficient are statistically significant, namely,
the expenditure of higher education and the investment in fixed assets have a positive effect on
economic growth of Jiangxi. We can further find that if total expenditure of higher education increases
by 1 percent, GDP in Jiangxi would increase by 1.1815 percent. If total investment in fixed assets rises
by 1 percent, GDP in Jiangxi would increase by 0.4484 percent. However, the effect that the expenditure
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of higher education promotes economic growth of Jiangxi is bigger than that of investment in fixed
assets' (1.181455>0.448352).
3.2.5 Error correction model test
The above analysis indicates that long-run equilibrium relation among these variables exists, but that the
long-run relation can maintain is on the basis of continuously dynamic adjusting in short-run. Thus, to
study higher education in Jiangxi how to affect economic growth of Jiangxi, we should set up error
correction model which can reflect its adjusting in short-term. The test results are given as follows.
∆LnGDP =0.118859 + 0.171116 ∆LnXf -0.098314 ∆LnX t - 0.99163 EC (-1)
②
(2.288477) (0.282928)
(-0.210121)
(-10.48331)*
S. E. of regression=0.11349 Durbin-Watson stat=1.971435
R 2 =0.858083
R 2 =0.869572
F-statistic=46.35538.
From the test result, we find that t-statistics in the error correction term, namely EC (-1) is significant,
which suggests a stable short-run property of the data exists. The error in each time period converges to
its long-run relation.
，
，
，
，
4 Conclusion
Based on the above analysis, we can come to the conclusion that (1) there is long-run equilibrium
relation between the development of higher education and economic growth in Jiangxi. In the long-run,
the development of higher education which is taken expenditure of education as the index of higher
education promotes economic growth. However, the development of higher education which is taken
students enrollment as the index of higher education does not promote economic growth. The reason is
possibly the brain drain, namely most parts of high quality brain trained up by higher education of
Jiangxi flow to other areas and do not make corresponding contribution to Jiangxi's economic growth. (2)
The effect that the expenditure of higher education promotes economic growth of Jiangxi is bigger than
that of investment in fixed assets'.
Therefore, to make a better use of higher education to serve economic development in Jiangxi and retain
the high quality brain trained up by higher education of Jiangxi to serve local economic development,
the local government should take preferential measure to attract domestic and foreign brain and fund to
flow in Jiangxi, and strengthen the effective interaction between higher education and local economy.
Acknowledgement:
Research Fund of Education Sciences of Jiangxi 11th Five-Year Planning of 2008, No. 08ZD005.
Research Fund of Education Sciences of Jiangxi 11th Five-Year Planning of 2006, No. 06ZD59.
References
[1]. Che Honghua. Research on Higher Education Driving Regional economy. Dongbei University of
Finance and Economics, Master Dissertation, 2003:24 29(in Chinese)
[2]. Yao Yilong, Lin Xiangli. Contribution of Education on Economic Growth: International
Comparison Based on the multivariable VAR Model. World Economy, 10(2005), p26 31(in
Chinese)
[3]. Wang Shoufa. Research on the Contribution of Higher Education to the economic Development.
Hunan University, Doctoral Dissertation, 2005:77 82(in Chinese)
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～
①
②
Note:
The t values are in parentheses. **indicates significance at 1% significance level; *5% significance level.
The t values are in parentheses. * indicates significance at 1% significance level.
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