Asian Journal of Education and Social Studies

For three decades, governments and international organisations have justified the expansion and restructuring of higher education by appeal to the knowledge economy, the proposition that economic advantage depends increasingly on the production, transmission and application of knowledge. The idea has shaped funding, governance, research and internationalisation policy across very different national systems, yet its theoretical premises and the evidence that sustains them have been examined largely within separate disciplinary literatures. This critical narrative review examines how the relationship between higher education and the knowledge economy has been theorised, what the evidence shows about the economic and social contributions of higher education, how institutions have been transformed in the name of that relationship, and which questions should guide future research. Peer-reviewed studies and reports of recognised international organisations were identified through structured searches of multidisciplinary, education and economics databases, supplemented by citation searching, and were appraised for conceptual contribution, design strength, scope and transparency. Human capital and endogenous growth theories remain the dominant justification, but the evidence supports a conditional rather than a general link. Regional and quasi-experimental studies indicate that universities raise local innovation and income, whereas cross-country estimates of the growth effect of graduate expansion are fragile and depend heavily on the quality of skills acquired. Graduate earnings advantages persist on average but are increasingly dispersed by institution, field and social origin, and over-education is widespread where enrolment growth outpaces demand for advanced skills. Massification, marketisation, performance management, commercialisation and ranking-driven competition have demonstrably altered institutional behaviour, but their contribution to economic outcomes is weakly established, whereas their costs for equity, academic work and public purposes are documented more consistently. Generative artificial intelligence and geopolitical restrictions on academic mobility now unsettle assumptions about which forms of knowledge are scarce and where they are produced. The knowledge-economy rationale is therefore better treated as a set of testable, context-dependent mechanisms than as a general warrant for expansion or market reform. Progress requires causal designs, comparative evidence from systems beyond the high-income world, and outcome measures that capture public as well as private returns.