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The Buffering Effect of Higher Education Expansion on the Okun’s Law in China

Author

Listed:
  • FAN HU

    (Jinan University)

  • ZIDONG AN

    (Renmin University of China)

Abstract

This paper studies the short-run relationship between the labor market and economic fluctuations using China’s province-level data and further investigates how higher education expansion policy influences this relationship. Following Okun’s law framework, we show that besides total employment, labor force participation also responds to economic fluctuations, resulting in a low sensitivity in the unemployment rate. Based on the interacted variable analysis, we also find that economic growth tends to have larger impacts on labor market indicators during economic downturns than upturns. Lastly, we provide novel evidence that higher education expansion buffers the relationship between the labor market and aggregate demand conditions during economic downturns. This paper sheds some light on achieving more inclusive economic growth in emerging economies through education policy.

Suggested Citation

  • Fan Hu & Zidong An, 2024. "The Buffering Effect of Higher Education Expansion on the Okun’s Law in China," Hacienda Pública Española / Review of Public Economics, IEF, vol. 250(3), pages 89-107, September.
    • Handle: RePEc:hpe:journl:y:2024:v:250:i:3:p:89-107
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    References listed on IDEAS

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    More about this item

    Keywords

    Okun’s law; Unemployment; Business cycles; Higher education expansion.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development

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