The Impact of Educational Investment on Sustainable Economic Growth in Guangdong, China: A Cointegration and Causality Analysis

• Main Authors: Liping Liao, Minzhe Du, Bing Wang, Yanni Yu
• Format: Article
• Language: English
• Published: MDPI AG 2019-02-01
• Series: Sustainability
• Subjects: educational investment; sustainable economic growth; cointegration; causality; hysteresis effect
• Online Access: https://www.mdpi.com/2071-1050/11/3/766

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.