This study examines one of the channels through which education may contribute to economic growth, specifically, innovation. Endogenous growth theory has long suggested that human capital lead to greater innovation and, through technology innovation and diffusion, contribute to economic growth. However, there is little evidence on the role of human capital in innovation. Using the Chinese provincial data from 1997 to 2006, we show that workers’ tertiary education is significantly and positively related to provincial innovative activities measured by invention patent applications per capita. This result does not vary when spatial dependence is allowed in the estimation. Thus, we find strong and robust evidence for the prediction of endogenous growth theory regarding the effect of human capital on innovation. However, we do not find the consistently significant effect of innovation on growth. This finding may, however, relate to the growth pattern in China.
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