The Role of Education in Expanding Domestic Demand to Drive Economic Growth

For a long time, the low consumption rate and insufficient domestic demand have constrained economic development in China. Hence, expanding domestic demand is the strategic base for building a new development pattern, and education has a unique effect in moderately increasing consumption and expanding domestic demand. Using the provincial-level panel data from 2005 to 2018 in China, this study investigates the link between education, consumption and economic growth and finds that education can enhance consumption ability, optimize consumption structure, increase consumption intention, and thus promote economic growth. It finds out that the mechanism for education to promote consumption and the economic growth varies in different stages of education: higher education contributes more to the improvement of both the residents’ ability to consume and the consumption structure, whereas primary education plays a more significant role in increasing people's willingness to consume. In the long run, education still plays a fundamental, pioneering and strategic role in the new pattern of development, thus first priority must be given to the development of education.