The spillover effect of education on productivity: Evidence from China

Paper develops an endogenous model to analyze the impact of education on total factor productivity. The econometric model including education expenditure, education spillovers and productivity is established. Using Malmquist productivity index method, the total factor productivity can be decomposed into technological efficiency and technological progress. Paper employs the panel data set in China to examine the impact and the spillovers from education on the change of productivity, technological efficiency and technological progress over the period 1991-2007. We find that education is positive to the change of productivity and conducive to the technology efficiency improvements. But due to the irrational distribution of educational spending at all levels of education, the spillovers of education perform to deteriorate technological efficiency and contribute to technological progress.