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The Contribution of Human Capital to China's Economic Growth

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  • John Whalley
  • Xiliang Zhao

Abstract

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.

Suggested Citation

  • John Whalley & Xiliang Zhao, 2010. "The Contribution of Human Capital to China's Economic Growth," NBER Working Papers 16592, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16592
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    References listed on IDEAS

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    1. 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.
    2. 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, April.
    3. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    4. Theodore W. Schultz, 1960. "Capital Formation by Education," Journal of Political Economy, University of Chicago Press, vol. 68, pages 571-571.
    5. Yuqing Xing, 2011. "China's High-tech Exports: Myth and Reality," GRIPS Discussion Papers 11-05, National Graduate Institute for Policy Studies.
    6. Gregory C. Chow, 1993. "Capital Formation and Economic Growth in China," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 809-842.
    7. 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.
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    More about this item

    JEL classification:

    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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