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The human capital roots of the middle income trap: the case of China

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  • Linxiu Zhang
  • Hongmei Yi
  • Renfu Luo
  • Changfang Liu
  • Scott Rozelle

Abstract

China, like other middle income countries, is facing the challenges of the next stage of development as its leaders seek to guide the nation into becoming a high income country. At this same point of development, however, other countries have faltered, raising the possibility of stagnation or collapse. The stagnation of growth after reaching a level of income high enough to be call “middle income” is a phenomenon which some observers call the Middle Income Trap. In this paper we explore one of the major challenges that nations, including China, must face in the transition from middle to high income: the management of inequality. In particular, we explore the possible roots of future inequality that is associated with a nation’s underinvestment in the human capital of broad segments of its population. To meet this goal we first look at several benchmarks of successful transitions from middle to high income (e.g., the case of South Korea) and not-so-successful transitions (Mexico). We then exam more systematically the characteristics of countries that have successfully transitioned (or graduated) from middle to high income (Graduates) and those that are attempting to do so now (Aspirees). With this background, we describe the challenges that China faces in the light of rising wage rates and highly unequal income distribution today. We also document the high levels of human capital inequality in China today, a harbinger of high future inequality. In discussing the sources of the human capital inequality, in addition to the structural and institutional barriers that are discouraging many students (and their parents) from staying in school to achieve the levels of learning that we believe are necessary for preparing individuals for employment in the coming decades, we also identify severe nutritional and health problems. We believe that these nutrition and health problems, unless addressed, are creating serious China’s human capital deficiencies in poor areas of rural C
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  • Linxiu Zhang & Hongmei Yi & Renfu Luo & Changfang Liu & Scott Rozelle, 2013. "The human capital roots of the middle income trap: the case of China," Agricultural Economics, International Association of Agricultural Economists, vol. 44(s1), pages 151-162, November.
    • Handle: RePEc:bla:agecon:v:44:y:2013:i:s1:p:151-162
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    1. Yusuf , Shahid & Nabeshima, Kaoru, 2009. "Can Malaysia escape the middle-income Trap ? a strategy for Penang," Policy Research Working Paper Series 4971, The World Bank.
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    4. Xinxin Chen & Yaojiang Shi & Di Mo & James Chu & Prashant Loyalka & Scott Rozelle, 2013. "Impact of a Senior High School Tuition Relief Program on Poor Junior High School Students in Rural China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 21(3), pages 80-97, May.
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    7. Gustavo J. Bobonis & Edward Miguel & Charu Puri-Sharma, 2006. "Anemia and School Participation," Journal of Human Resources, University of Wisconsin Press, vol. 41(4).
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    Cited by:

    1. Fang Chang & Wenbin Min & Yaojiang Shi & Kaleigh Kenny & Prashant Loyalka, 2016. "Educational Expectations and Dropout Behavior among Junior High Students in Rural China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(3), pages 67-85, May.
    2. Tyers, Rod, 2014. "Looking inward for transformative growth," China Economic Review, Elsevier, vol. 29(C), pages 166-184.
    3. repec:eee:chieco:v:46:y:2017:i:s:p:s3-s16 is not listed on IDEAS
    4. repec:eee:chieco:v:52:y:2018:i:c:p:111-125 is not listed on IDEAS
    5. Bai, Yunli & Zhang, Linxiu & Yi, Hongmei & Zheng, Liming & Rozelle, Scott, 2017. "The Impact of an Academic High School Tuition Relief Program on Students’ Matriculation into High Schools in Rural China," China Economic Review, Elsevier, vol. 43(C), pages 16-28.
    6. Xuefeng Zhan & Shaoping Li & Chengfang Liu & Linxiu Zhang, 2014. "Effect of Migration on Children's Self-esteem in Rural China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(4), pages 83-101, July.
    7. Gill,Indermit S. & Kharas,Homi, 2015. "The middle-income trap turns ten," Policy Research Working Paper Series 7403, The World Bank.
    8. Shenggen Fan & Ravi Kanbur & Shang-Jin Wei & Xiaobo Zhang, 2013. "The Economics of China: Successes and Challenges," NBER Working Papers 19648, National Bureau of Economic Research, Inc.
    9. Song, Yang, 2014. "What should economists know about the current Chinese hukou system?," China Economic Review, Elsevier, vol. 29(C), pages 200-212.
    10. repec:eee:chieco:v:51:y:2018:i:c:p:283-293 is not listed on IDEAS

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