The Relationship between Public Educational Investment and Economic Growth in China

When economists and politicians discuss the policies that could raise growth rates, education usually takes centre stage. Using yearly data set from 1952 to 2007, this paper has proposed to use linear Granger causality to investigate the relationship between public educational investment and economic growth in China. The study finds that there is a strictly bidirectional Granger causality between the public educational investment and economic growth. The public educational investment drives economic growth and in turn is driven by public educational expenditures. Furthermore, the bidirectional Granger causality is robust and asymmetrical, in terms of persistence, and significance, the effect of gross domestic product impact on the public educational investment is more pronounced than the reverse one. Those findings can provide further positive evidence for government to make fiscal policy and achieve education and economy development.