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Human Capital, Economic Growth, and Regional Inequality in China

Belton Fleisher (), Haizheng Li () and Min Qiang (Kent) Zhao
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Haizheng Li: School of Economics, Georgia Institute of Technology

No 09-01, Working Papers from Ohio State University, Department of Economics

Abstract: We show how regional growth patterns in China depend on physical,, human, and infrastructure capital; foreign direct investment (FDI); and market reforms, especially the reforms that followed Deng Xiaoping’s South Trip in 1992 those that resulted from serious hardening of budget constraints of state enterprises around 1997. We find that FDI had a much larger effect on TFP growth before 1994 than after, and we attribute this to the encouragement of and increasing success of private and quasi-private enterprises. We find that human capital positively affects output per worker and productivity growth in our cross-provincial study. Moreover, we find both direct and indirect effects of human capital on TFP growth. The direct effect is hypothesized to come from domestic innovation activities, while the indirect impact is a spillover effect of human capital on TFP growth. We conduct cost-benefit analysis of hypothetical investments in human capital and infrastructure. We find that, while investment in infrastructure generates higher returns in the developed, eastern regions than in the interior, investing in human capital generates slightly higher or comparable returns in the interior regions. We conclude that human capital investment in less-developed areas can improve economic efficiency, neither investment strategy is a magic bullet for reducing China’s regional income disparities.

JEL-codes: O15 O18 O47 O53 (search for similar items in EconPapers)
Pages: 76 pages
Date: 2009-01
New Economics Papers: this item is included in nep-cna, nep-dev, nep-fdg, nep-geo, nep-hrm, nep-ltv and nep-tra
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Related works:
Journal Article: Human capital, economic growth, and regional inequality in China (2010) Downloads
Working Paper: Human Capital, Economic Growth, and Regional Inequality in China (2008) Downloads
Working Paper: Human Capital, Economic Growth, and Regional Inequality in China (2007) Downloads
Working Paper: Human Capital, Economic Growth, and Regional Inequality in China (2007) Downloads
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