Interaction between Higher Education Outputs and Industrial Structure Evolution: Evidence from Hubei Province, China

Abstract

In China, the government has made great achievements in mass higher education and intended to promote sustainable economic and social development. However, China still lacks innovation today and is trapped in its low-value-added industrial dilemma. Therefore, this paper aimed to understand how higher education outputs and industrial structure evolution affect each other by analysing evidence from Hubei, China, from 2004 to 2013. This paper quantified higher education outputs into graduate scale, education advancement, and innovation outputs and quantified industrial structure evolution into industrial structure upgrading and industrial structure rationalisation. Next, we applied the Granger causality test, vector auto-regression model, impulse response function, and variance decomposition to explore the causal relationships, response styles, and contribution rates between the indicators. The findings are as follows: (i) industrial structure upgrading and rationalisation are the Granger reasons for education advancement, and innovation outputs and graduate scale are the Granger reasons for industrial structure rationalisation; (ii) industrial structure upgrading and rationalisation can promote education advancement both quickly and significantly, however, education advancement, in turn, does not contribute to industrial structure evolution; (iii) though the contribution of innovation outputs to industrial structure rationalisation is hysteretic, it is greater than that of the graduate scale.