IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Human Capital, Economic Growth, and Regional Inequality in China

  • Fleisher, Belton M.

    ()

    (Ohio State University)

  • Li, Haizheng

    ()

    (Georgia Tech)

  • Zhao, Min Qiang

    ()

    (Ohio State University)

We study the dispersion in rates of provincial economic- and TFP growth in China. Our results show that regional growth patterns can be understood as a function of several interrelated factors, which include investment in physical capital, human capital, and infrastructure capital; the infusion of new technology and its regional spread; and market reforms, with a major step forward occurring following Deng Xiaoping’s “South Trip” in 1992. We find that FDI had much larger effect on TFP growth before 1994 than after, and we attribute this to emergence of other channels of technology transfer when marketization accelerated. We find that human capital positively affects output per worker and productivity growth. In particular, in terms of its direct contribution to production, educated labor has a much higher marginal product. Moreover, we estimate a positive, direct effect of human capital on TFP growth. This direct effect is hypothesized to come from domestic innovation activities. The estimated spillover effect of human capital on TFP growth is positive and statistically significant, which is very robust to model specifications and estimation methods. The spillover effect appears to be much stronger before 1994. We conduct cost-benefit analysis and a policy “experiment,” in which we project the impact increases in human capital and infrastructure capital on regional inequality. We conclude that investing in human capital will be an effective policy to reduce regional gaps in China as well as an efficient means to promote economic growth.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ftp.iza.org/dp2703.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2703.

as
in new window

Length: 56 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2703
Contact details of provider: Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Yaohui Zhao, 1997. "Labor Migration and Returns to Rural Education in China," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1278-1287.
  2. Liu, Zhiqiang, 2008. "Foreign direct investment and technology spillovers: Theory and evidence," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 176-193, February.
  3. Chen, Jian & Fleisher, Belton M., 1996. "Regional Income Inequality and Economic Growth in China," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 141-164, April.
  4. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
  5. Fleisher, Belton M. & Peter, Klara Sabirianova & Wang, Xiaojun, 2004. "Returns to Skills and the Speed of Reforms: Evidence from Central and Eastern Europe, China, and Russia," IZA Discussion Papers 1182, Institute for the Study of Labor (IZA).
  6. Chang-Tai Hsieh & Peter J Klenow, 2008. "Misallocation and Manufacturing TFP in China and India," 2008 Meeting Papers 121, Society for Economic Dynamics.
  7. Haizheng Li & Steven Zahniser, 2002. "The Determinants of Temporary Rural-to-Urban Migration in China," Urban Studies, Urban Studies Journal Limited, vol. 39(12), pages 2219-2235, November.
  8. Chow, G.C., 1990. "Capital Formation And Economic Growth In China," Papers 356, Princeton, Department of Economics - Econometric Research Program.
  9. Ran, Jimmy & Voon, Jan P. & Li, Guangzhong, 2007. "How does FDI affect China? Evidence from industries and provinces," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 774-799, December.
  10. Carsten A Holz, 2005. "New Capital Estimates for China," Macroeconomics 0512001, EconWPA.
  11. James J. Heckman & Xuesong Li, 2004. "Selection bias, comparative advantage and heterogeneous returns to education: evidence from China in 2000," Pacific Economic Review, Wiley Blackwell, vol. 9(3), pages 155-171, October.
  12. 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.
  13. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  14. Yuanzheng Cao & Yingyi Qian & Barry R. Weingast, 1997. "From Federalism, Chinese Style, to Privatization, Chinese Style," Working Papers 97049, Stanford University, Department of Economics.
  15. Loren BRANDT & Carsten A HOLZ, 2005. "Spatial Price Differences in China: Estimates and Implications," Development and Comp Systems 0504010, EconWPA.
  16. Belton Fleisher & Haizheng Li & Min Qiang Zhao, 2007. "Human Capital, Economic Growth, and Regional Inequality in China," William Davidson Institute Working Papers Series wp857, William Davidson Institute at the University of Michigan.
  17. Catriona Purfield, 2006. "Mind the Gap; Is Economic Growth in India Leaving Some States Behind?," IMF Working Papers 06/103, International Monetary Fund.
  18. Anne O. Krueger, 1995. "East Asian Experience and Endogenous Growth Theory," NBER Chapters, in: Growth Theories in Light of the East Asian Experience, NBER-EASE Volume 4, pages 9-36 National Bureau of Economic Research, Inc.
  19. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  20. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
  21. Barry Bosworth & Susan M. Collins, 2007. "Accounting for Growth: Comparing China and India," NBER Working Papers 12943, National Bureau of Economic Research, Inc.
  22. M. Hashem Pesaran, 2004. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," CESifo Working Paper Series 1331, CESifo Group Munich.
  23. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  24. Charles I. Jones, 2004. "The Shape of Production Function and the Direction of Technical Change," NBER Working Papers 10457, National Bureau of Economic Research, Inc.
  25. Pritchett, Lant, 2006. "Does Learning to Add up Add up? The Returns to Schooling in Aggregate Data," Handbook of the Economics of Education, Elsevier.
  26. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  27. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
  28. Nazrul Islam & Erbiao Dai & Hiroshi Sakamoto, 2006. "Role of TFP in China's Growth ," Asian Economic Journal, East Asian Economic Association, vol. 20(2), pages 127-159, 06.
  29. Mark E Schaffer & Steven Stillman, 2006. "XTOVERID: Stata module to calculate tests of overidentifying restrictions after xtreg, xtivreg, xtivreg2, xthtaylor," Statistical Software Components S456779, Boston College Department of Economics, revised 22 Feb 2015.
  30. Zhao, Yaohui, 1999. "Labor Migration and Earnings Differences: The Case of Rural China," Economic Development and Cultural Change, University of Chicago Press, vol. 47(4), pages 767-82, July.
  31. Fleisher, Belton M. & Wang, Xiaojun, 2001. "Efficiency Wages and Work Incentives in Urban and Rural China," Journal of Comparative Economics, Elsevier, vol. 29(4), pages 645-662, December.
  32. Pritchett, Lant, 1996. "Where has all the education gone?," Policy Research Working Paper Series 1581, The World Bank.
  33. Appleton, Simon & Knight, John & Song, Lina & Xia, Qingjie, 2002. "Labor retrenchment in China: Determinants and consequences," China Economic Review, Elsevier, vol. 13(2-3), pages 252-275.
  34. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  35. Temple, Jonathan R. W., 2001. "Generalizations that aren't? Evidence on education and growth," European Economic Review, Elsevier, vol. 45(4-6), pages 905-918, May.
  36. Belton M. Fleisher & Haizheng Li & Shi Li & Xiaojun Wang, 2000. "Sorting, Selection, and Transformation of the Return to College Education In China," William Davidson Institute Working Papers Series wp756, William Davidson Institute at the University of Michigan.
  37. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
  38. Liu, Zhiqiang, 2007. "The external returns to education: Evidence from Chinese cities," Journal of Urban Economics, Elsevier, vol. 61(3), pages 542-564, May.
  39. Temple, Jonathan, 1999. "A positive effect of human capital on growth," Economics Letters, Elsevier, vol. 65(1), pages 131-134, October.
  40. Heckman, James J., 2005. "China's human capital investment," China Economic Review, Elsevier, vol. 16(1), pages 50-70.
  41. Borensztein, Eduardo & Ostry, Jonathan D, 1996. "Accounting for China's Growth Performance," American Economic Review, American Economic Association, vol. 86(2), pages 224-28, May.
  42. Wolff, Edward N, 1991. "Capital Formation and Productivity Convergence over the Long Term," American Economic Review, American Economic Association, vol. 81(3), pages 565-79, June.
  43. Yingyi Qian & Barry R. Weingast, 1997. "Federalism as a Commitment to Reserving Market Incentives," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 83-92, Fall.
  44. Wang, Yan & Yao, Yudong, 2003. "Sources of China's economic growth 1952-1999: incorporating human capital accumulation," China Economic Review, Elsevier, vol. 14(1), pages 32-52.
  45. Yang, Dennis Tao, 2002. "What has caused regional inequality in China?," China Economic Review, Elsevier, vol. 13(4), pages 331-334, December.
  46. Jesus Felipe & Carsten Holz, 2001. "Why do Aggregate Production Functions Work? Fisher's simulations, Shaikh's identity and some new results," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(3), pages 261-285.
  47. Liu, Zhiqiang, 2005. "Institution and inequality: the hukou system in China," Journal of Comparative Economics, Elsevier, vol. 33(1), pages 133-157, March.
  48. Sonobe, Tetsushi & Hu, Dinghuan & Otsuka, Keijiro, 2004. "From inferior to superior products: an inquiry into the Wenzhou model of industrial development in China," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 542-563, September.
  49. Demurger, Sylvie, 2001. "Infrastructure Development and Economic Growth: An Explanation for Regional Disparities in China?," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 95-117, March.
  50. Hartog,Joop & Maassen van den Brink,Henriëtte (ed.), 2007. "Human Capital," Cambridge Books, Cambridge University Press, number 9780521873161.
  51. Li, Xiaoying & Liu, Xiaming, 2005. "Foreign Direct Investment and Economic Growth: An Increasingly Endogenous Relationship," World Development, Elsevier, vol. 33(3), pages 393-407, March.
  52. Fleisher, Belton M. & Chen, Jian, 1997. "The Coast-Noncoast Income Gap, Productivity, and Regional Economic Policy in China," Journal of Comparative Economics, Elsevier, vol. 25(2), pages 220-236, October.
  53. Fu, Xiaolan, 2004. "Limited linkages from growth engines and regional disparities in China," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 148-164, March.
  54. Mark E Schaffer, 2005. "XTIVREG2: Stata module to perform extended IV/2SLS, GMM and AC/HAC, LIML and k-class regression for panel data models," Statistical Software Components S456501, Boston College Department of Economics, revised 22 Feb 2015.
  55. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
  56. Fleisher, Belton M. & Wang, Xiaojun, 2004. "Skill differentials, return to schooling, and market segmentation in a transition economy: the case of Mainland China," Journal of Development Economics, Elsevier, vol. 73(1), pages 315-328, February.
  57. Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1220-1261, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp2703. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.