Growth and parental preference for education in China

This study explores the implications of education preference in an innovation-driven growth model that features an interaction between endogenous technological progress and human capital accumulation. Parents invest in children's education partly due to the preference for their children to be educated. We consider a preference parameter that measures the degree of this cultural preference for education. We find that a society such as China in which parents place a high value on education accumulates more human capital, which is conducive to innovation, but the larger education investment also crowds out resources for R&D. As a result, a stronger cultural preference for education has an inverted-U effect on long-run growth. We also derive a closed-form solution for the transitional path of the equilibrium growth rate from any initial state and find that a strengthening of education preference causes an initial negative effect on growth. Finally, we consider a number of extensions to the benchmark model. (C) 2016 Elsevier Inc. All rights reserved.