Higher Education Human Capital Expansion and Common Prosperity: Evidence from China

This study measures common prosperity of China from three dimensions: affluence, shareability, and sustainability. Based on a matched sample of data covering 31 provincial-level regions in mainland China and 3,741 A-share listed firms, it uses higher education human capital expansion (HEHCE) caused by the 1999 university expansion policy (UEP) as an exogenous policy shock. Using a difference-in-differences (DID) method, this paper studies the impact of HEHCE on China’s common prosperity. The findings show that HEHCE substantially contributes to common prosperity. This conclusion remains robust after a series of robustness tests and endogeneity treatments. The heterogeneity test shows that the impact of the HEHCE on common prosperity varies by regions, education and technology expenditures and enterprises’ digital transformation. The four-stage mediating effect test shows that corporate technological innovation and industrial structure upgrading are the transmission channels for EHCE to promote common prosperity. This study provides empirical evidence and policy implications to fully leverage the role of HEHCE in promoting economic and social development.