Confucian culture, public education expenditure, and economic growth

Abstract

Confucian culture has been found to have significant effects on economic outcomes, yet current studies seldom delve into its impact on regional economic growth in China and the role of government behavior as a mechanism. From the perspective of government response to public demands for education, this paper examines whether Confucian culture fosters economic growth by driving up public education expenditure. Using panel data at the prefecture-level over 2003–2018 and taking the historical population density of jinshi in the Ming and Qing Dynasties as the proxy of the Confucian culture, the empirical analysis is done mainly through pooled OLS and IV analysis. Results show that Confucian culture has a significant and positive effect on economic growth, which can be partially explained by its positive influence on public education expenditure. The channel still holds after controlling human capital in regression. Further discussion of the clan culture and local governors’ cultural backgrounds suggests that higher public education expenditure results from the local government’s passive response to public demands for education. Thus, local governments are suggested to widen and improve the channels for expressing public demands and increase public education expenditure while balancing public demands and the need to boost economic growth.