Government spending on local higher education institutions (LHEIs) in China: analysing the determinants of general appropriations and their contributions

Government spending on higher education is a perennial research theme, but empirical evidence from China is relatively rare. Based on panel data of local higher education institutions in 31 Chinese provinces from 2003 to 2016, this paper investigates the determinants of general appropriations and quantifies their relative contributions in consideration of socioeconomic, political, and higher education variables. The results of two-way fixed effect modelling reveal that province GDP per capita, government size, percent of education spending, total enrolment, and tuition fees are five major determinants. Further, the results of Shapley decomposition show that these five determinants jointly contribute to 56.793% of total R2. Drawing on Chinese practices of higher education expansion in the last two decades, this paper concludes with policy implications for sustaining higher education funding.