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The Contribution Of Human Capital To China'S Economic Growth

  • JOHN WHALLEY

    ()

    (Centre for International Governance Innovation (CIGI) and Department of Economics, Faculty of Social Science, Western University, 1151 Richmond Street N London, Ontario N6A 5C2, Canada)

  • XILIANG ZHAO

    ()

    (School of Economics, Xiamen University, and Key Laboratory of Econometrics, Ministry of Education, Xiamen, China 361005, China)

This paper develops a human capital measure in the sense of Schultz [Schultz, T. W. 1960. "Capital Formation by Education." Journal of Political Economy, 68: 571, University of Chicago Press.] and uses this to reevaluate the contribution of human capital to China's economic growth rather than relying on years of schooling as in current literature. The results indicate that human capital plays an important role in China's economic growth, 38.1% of economic growth over 1978–2008, and even higher for 1999–2008. In addition, because human capital formation accelerated following major educational expansion increases after 1999 (college enrollment in China increased nearly fivefold between 1997 and 2007) while growth rates of Gross domestic product (GDP) are little changed over the period after 1999, total factor productivity (TFP) increases fall if human capital is used in growth accounting as we suggest. TFP, by our calculations, contributes 16.92% of growth between 1978 and 2008, but this contribution falls sharply between 1999 and 2008. TFP growth estimates along with the high contribution of physical and human capital to economic growth seem to suggest that there could have been decreases in the efficiency of input usage in China or worsened misallocation of physical and human capital in recent years. These results underscore the importance of efficient use of human capital, as well as the volume of human capital creation, in China's growth strategy.

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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal China Economic Policy Review.

Volume (Year): 02 (2013)
Issue (Month): 01 ()
Pages: 1350001-1-1350001-22

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Handle: RePEc:wsi:ceprxx:v:02:y:2013:i:01:p:1350001-1-1350001-22
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  1. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  2. Yuqing Xing, 2011. "China's High-tech Exports: Myth and Reality," GRIPS Discussion Papers 11-05, National Graduate Institute for Policy Studies.
  3. Chow, G.C., 1990. "Capital Formation And Economic Growth In China," Papers 67, Princeton, Woodrow Wilson School - Discussion Paper.
  4. Gemmell, Norman, 1996. "Evaluating the Impacts of Human Capital Stocks and Accumulation on Economic Growth: Some New Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 9-28, February.
  5. Theodore W. Schultz, 1960. "Capital Formation by Education," Journal of Political Economy, University of Chicago Press, vol. 68, pages 571.
  6. Yan Wang & Yudong Yao, 2001. "Sources of China's economic growth, 1952-99 : incorporating human capital accumulation," Policy Research Working Paper Series 2650, The World Bank.
  7. Yao Li & John Whalley & Shunming Zhang & Xiliang Zhao, 2008. "The Higher Educational Transformation of China and Its Global Implications," NBER Working Papers 13849, National Bureau of Economic Research, Inc.
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