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The Contribution of Human Capital to China's Economic Growth

  • John Whalley
  • Xiliang Zhao

This paper develops a human capital measure in the sense of Schultz (1960) and then reevaluates the contribution of human capital to China's economic growth. The results indicate that human capital plays a much more important role in China's economic growth than available literature suggests, 38.1% of economic growth over 1978-2008, and even higher for 1999-2008. In addition, because human capital formation accelerated following the major educational expansion increases after 1999 (college enrollment in China increased nearly fivefold between 1997 and 2007) while growth rates of GDP are little changed over the period after 1999, total factor productivity 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 is -7.03% between 1999 and 2008. Negative TFP growth along with the high contribution of physical and human capital to economic growth seem to suggest that there have been decreased in the efficiency of inputs 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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File URL: http://www.nber.org/papers/w16592.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16592.

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Date of creation: Dec 2010
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Publication status: published as John Whalley & Xiliang Zhao, 2013. "The Contribution Of Human Capital To China'S Economic Growth," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 2(01), pages 1350001-1-1.
Handle: RePEc:nbr:nberwo:16592
Note: EFG
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  1. Yuqing Xing, 2011. "China's High-tech Exports: Myth and Reality," GRIPS Discussion Papers 11-05, National Graduate Institute for Policy Studies.
  2. Chow, Gregory C, 1993. "Capital Formation and Economic Growth in China," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 809-42, August.
  3. Yao Amber Li & John Whalley & Shunming Zhang & Xiliang Zhao, 2011. "The Higher Educational Transformation of China and Its Global Implications," The World Economy, Wiley Blackwell, vol. 34(4), pages 516-545, 04.
  4. 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.
  5. Norman Gemmell,, . "Evaluating the Impacts of Human Capital Stocks and Accumulation on Economic Growth: Some New Evidence," Discussion Papers 95/17, University of Nottingham, CREDIT.
  6. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  7. Theodore W. Schultz, 1960. "Capital Formation by Education," Journal of Political Economy, University of Chicago Press, vol. 68, pages 571.
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