Spatial dynamics and determinants of county-level education expenditure in China

In this paper, a multivariate spatial autoregressive model of local public education expenditure determination with autoregressive disturbance is developed and estimated. The existence of spatial interdependence is tested using Moran's I statistic and Lagrange multiplier test statistics for both the spatial error and spatial lag models. The full model is estimated by spatial econometric models approach using county-level data from 1,520 Chinese counties. The results indicate the existence of significant spillover effects among local governments with respect to spending in local public education services. The economic level determines local education expenditure level significantly. There are non-linear relationships between education expenditure and predictors such as the proportion of non-agricultural population, the immigrant population from other provinces and children population. It reveals that countries in coastal area and in inland area respond asymmetrically to neighbors' education expenditures, respectively.