The Role of education in the Kuznets Curve: evidence from 31 provinces in China

Abstract

This study aims to investigate the impact of education and economic development on income inequality in China. This study uses the linear panel quantile regression model and quadratic panel quantile regression model as an analysis tool. The data used in this study are panel data of 31 provinces in China spanning from 2004-2019. This study is based on the Kuznets hypothesis that an early stage, education and economic variables may increase income inequality. But then, when the economy continuously develops and people can access education properly or reach a certain level of development, income inequality is reduced. Therefore, this study adds an extension of the standard Kuznets curve by including a various educational and economic indicators in the empirical model and investigating it using China’s dataset. The results show that education has a significant role in reducing income inequality in China. In particular, decreasing the average years of schooling, the number of primary schools and junior high schools can help reduce income inequality in 31 provinces in China. Moreover, increasing the teacher-student ratio of secondary schools, the number of universities, and rising inflation rate may help reduce income inequality at the provincial level. Finally, based on the quadratic panel quantile regression model, this study found that there exists a nonlinear relationship, corresponding to the Kuznets curve hypothesis, between the average years of schooling and income inequality in 31 Provinces of China. However, this study failed to find the significant nonlinear relationship between GDP per capita and income inequality, indicating no Kuznets curve for this dataset.