Efficiency gains from reallocating human capital between China’s state and non-state sectors

Lijuan Cui and Yanyan Xiong

Applied Economics Letters, 2023, vol. 30, issue 20, 2921-2925

Abstract: This study is among the first to use household survey data from 1988 to 2019 to demonstrate how human capital misallocation between China’s state and non-state sectors has evolved and to estimate efficiency gains from reallocation over time. Our results show that human capital allocation between sectors has been converging to, diverging from, and re-converging to an optimal level, implying that the Chinese labour market has been gradually approaching efficiency during its market-oriented transition. Lower-educated labours had been more misallocated between the two sectors than higher-educated ones. Efficiency gains from reallocating human capital between sectors depend on the degree of misallocation at each stage and the gains are comparable to contemporaneous domestic gross research and development expenditures.

Date: 2023
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DOI: 10.1080/13504851.2022.2115966

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