The Impact of Urban Education on the Income Gap of Urban Residents: Evidence from Central China

Abstract

It is very important for a country’s sustainable economic and social development to reduce the income gap between urban residents. Through investigating the impact of urban education level and its different levels on the income gap of urban residents in Central China, this paper provides the basis for formulating scientific and rational urban education development policies in Central China. Based on Central China’s urban dynamic panel data, this paper examines the impact by using the system GMM (Generalized Method of Moments). The results show that overall, the improvement of urban education level helps to narrow the income gap of urban residents in Central China cities. Specifically, improvement of primary education level and secondary education level helps to narrow the income gap of urban residents, and improvement of higher education level enlarges the income gap of urban residents. Nonetheless, with further development of higher education in the cities, the income structure of lower-middle-income and low-income groups will be optimized, and subsequently higher education in cities will probably narrow the income gap between urban residents. In terms of the type of cities, improvement of education level in provincial capitals widens the income gap of urban residents, and improvement of education level in prefecture-level cities and county-level cities helps to narrow the income gap of urban residents. For all three types of cities, improvement of primary education level helps to narrow the income gap of urban residents, and the improvement of higher education level widens the income gap of urban residents. The improvement of secondary education level widens the income gap of urban residents in provincial capital cities but reduces the income gap of residents in prefecture-level cities and county-level cities. The policy implication from this study is that, to effectively and expeditiously narrow the income gap of urban residents in Central China, prefecture-level and county-level cities need to vigorously develop urban education, especially urban primary education and secondary education. At the same time, cities in Central China also need to actively develop higher education. Although the income gap of urban residents might be widened temporarily in the short term, the development of urban higher education will increase property income and net operating income of the local middle-low-income and low-income groups in the long term. Ultimately this policy would optimize the income structure of local urban residents and narrow the income gap of urban residents.