Overview of China

Overview of China

1. Briefly summarize human capital trends in China

Since the concept of human capital was introduced to modern economic analysis by Schultz (1961) and Becker (1964), it has been widely used in academic studies and policy analysis. Human capital is probably “the most important and most original development in the economics of education” in the second part of the 20th century (Coleman, 1990). The latest definition of human capital from the Organization for Economic Co-operation and Development (OECD) is “The knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being” (OECD, 2001).

In most countries, human capital accounts for more than 60% of the nation's wealth, which includes natural resources, physical capital and human capital (World Bank, 1997). It is generally believed that human capital is an important source of economic growth and innovation, an important factor for sustainable development, and for reducing poverty and inequality (see, for example, Stroombergen et al., 2002, and Keeley, 2007). For example, the detailed analysis of human capital accounts for Canada, New Zealand, Norway, Sweden, and the United States unanimously shows that human capital is a leading source of economic growth.1 In China, since the start of economic reforms, the economy has grown at a dramatic rate. It is believed that human capital has played a significant role in the Chinese economic miracle (see, for example, Fleisher and Chen, 1997, and Démurger, 2001).

Additionally, studies show that human capital also has an important effect on productivity growth and on reducing regional inequality in China. Despite the important role of human capital in the Chinese economy, however, until now, there has been almost no comprehensive measurement of the total stock of human capital in China. Human capital measures for China are central to any understanding of the global importance of human capital for a number of reasons. First, China is the most populous country in the world. It is important to understand the dynamics of human capital caused by demographic changes (for example, due to one-child policy, migration, and urbanization) and by the rapid expansion of education during the course of economic development. Second, such measures would allow for better assessment of the contribution of human capital to growth, development, and social well-being in empirical and theoretical research. Construction of human capital measures is an important step in assessing the contribution of human ...