Education and Economic Development: Evidence from China

Abstract

Evidence from thirty Chinese provinces indicates that education is crucial for economic development. Provinces with the higher average years of schooling in the intial year have higher growth rates of real per capita GDP in the subsequent year. Provinces with higher literacy rates and higher average years of schooling in the initial year experienced a faster decline of the employment share of agriculture in the subsequent year than provinces with lower literacy rates and lower average years of schooling. Primary education seems insufficient for the labor force to move from the agricultural sector to the industrial sector.