Impact of public educational expenditure on poverty in China

Abstract

Over last four decades, more than 740 million people were lifted out of poverty in China. The Chinese government set the target to eliminate absolute poverty and remove all poor counties from the poverty list by 2020. In this context, the paper attempts to investigate the impact of government expenditure on education upon poverty in China, using province-level panel data during 1997-2017. Poverty is measured by beneficiaries of social assistance programs, such as Minimum Living Guarantee System (in Chinese “Dibao”), Five Guarantee System (in Chinese “Wubao”) and Subsidies for destitute households (in Chinese “Te Kun Jiu Zhu”). The independent variable is “government appropriation for education”, which includes “public budgetary fund for education, taxes and fees collected by governments at all levels that are used for education purpose, enterprise appropriation for enterprise-run schools, income from school-run enterprises and social services that are used for education purpose and other national appropriations for education” (China Statistical Yearbook). Using OLS fixed effects model, we found that: 1) government expenditure on education is significantly negatively related to headcount ratio; 2) private investment in education also contributes to poverty reduction and seems to be a possible way to improve education quality; 3) rural household net income is negatively related to poverty rate, while 4) urban population has two opposite results, which raises an interesting topic to study.