Education fever : Inequality, fertility and growth
Gradstein, Mark (12.12.2025)
Numero
12/2025Julkaisija
Bank of Finland
2025
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe20251212118524Tiivistelmä
Demand for skilled labor and social status accorded by educational achievements induce a race to acquire education, dubbed “education fever”. In conjunction with credit market constraints and in the context of quantity-quality tradeoff, this, in turn, may reduce fertility, especially in well-educated families, and create cross section inequality while limiting intergenerational mobility. The resulting inequality is persistent which, in turn, may have adverse implications for economic growth. It is argued that these phenomena are consistent with recent economic and social developments in China.
Julkaisuhuomautus
NON-TECHNICAL SUMMARY
FOCUS
Demand for skilled labor and social status accorded by educational achievements induce a race to acquire education, dubbed “education fever”. In conjunction with credit market constraints and in the context of quantity-quality trade-off, this, in turn, may reduce fertility, especially in well-educated families, and create cross section inequality while limiting intergenerational mobility. The resulting inequality is persistent which, in turn, may have adverse implications for economic growth. It is argued that these phenomena are broadly consistent with recent economic and social developments in China.
CONTRIBUTION
We explore the effects of education fever on income inequality, fertility, and economic growth prospects. The analytical model yields closed form solutions with explicit relationships between variables of interest. Its calibrations to China’s economy indicates likely effects social norms and policy changes may have on long term development of the country.
FINDINGS
Education fever, the social status motive to strive for educational achievements, prevalent among richer families, results in persistently high inequality, low intergenerational mobility, and low fertility – all of which may have long run growth implications. Calibrations to China’s economy reveal that income inequality, whose evolution is well matched by the calibrated model, is very sensitive to social norms and policies restricting education fever. In particular, the private tutoring ban of 2021, if strictly enforced, may go a long way to reducing long run inequality.
FOCUS
Demand for skilled labor and social status accorded by educational achievements induce a race to acquire education, dubbed “education fever”. In conjunction with credit market constraints and in the context of quantity-quality trade-off, this, in turn, may reduce fertility, especially in well-educated families, and create cross section inequality while limiting intergenerational mobility. The resulting inequality is persistent which, in turn, may have adverse implications for economic growth. It is argued that these phenomena are broadly consistent with recent economic and social developments in China.
CONTRIBUTION
We explore the effects of education fever on income inequality, fertility, and economic growth prospects. The analytical model yields closed form solutions with explicit relationships between variables of interest. Its calibrations to China’s economy indicates likely effects social norms and policy changes may have on long term development of the country.
FINDINGS
Education fever, the social status motive to strive for educational achievements, prevalent among richer families, results in persistently high inequality, low intergenerational mobility, and low fertility – all of which may have long run growth implications. Calibrations to China’s economy reveal that income inequality, whose evolution is well matched by the calibrated model, is very sensitive to social norms and policies restricting education fever. In particular, the private tutoring ban of 2021, if strictly enforced, may go a long way to reducing long run inequality.