Enhancing Human Capital Investment - Key to Unlock China's Economic Plight of Unbalanced Development

This paper analyzes the implications of tax policy for the accumulation of human and physical capital and for the overall productivity level of the economy. A comprehensive income tax, applying to both labour income and capital income. discriminates against investments in human capital relative to investments in physical capital. Hence. it has an adverse impact on human capital accumulation. Taking into account a positive external effect of investments in human capital on overall productivity, the adverse effect of income taxation on human capital investments is significantly magnified.

The article discusses some areas of optimization of the spatial distribution of investments in human capital on the example of the regions of the North Caucasus Federal District. Based on the study of the subjects of investment in human capital and the mechanisms of investment in human capital, the article identifies a number of problems that allow us to talk about a weak system of organization and management of investments in human capital, as well as stochastic returns on these investments, which requires the search for mechanisms to optimize the processes of managing the spatial distribution of investments in human capital. In order to solve the problems identified in the study and to optimize the spatial distribution of investments in human capital at the regional level in the context of limited financial capabilities of the regions, the proposed article develops a mechanism for forming priorities for regional investments in human capital, which will take into account the characteristics of a particular region, its priorities in terms of investment in human capital, the structure and sources of such investments, taking into account the capabilities of the region. Within the framework of the proposed study, it is determined that the formation of priorities for regional investments in human capital should be determined as the ratio of the required volume of investment investments to the costs of achieving specific results of socio-economic development, taking into account specific criteria for assessing the financial support of the regional investment process. The mechanism of formation of priorities of regional investments in human capital proposed in the scientific article will allow optimizing the distribution of investments in regional human capital, since the priority areas of investment are determined here taking into account the available resources of the region, as well as taking into account the assessment of their multiplier effect for sustainable regional development as a whole.

This paper seeks to provide new insight into how school and post school training investments are linked to employer workplace practices and outcomes using a unique nationally representative survey of establishments in the U.S., the Educational Quality of the Workforce National Employers Survey (EQW-NES). We go beyond simply measuring the incidence of formal or informal training to examine the determinants of the types employers invest in, the relationship between formal school and employer provided training, who is receiving training, the links between investments in physical and human capital, and the impact that human capital investments have on the productivity of establishments. We find that the smallest employers are much less likely to provide formal training programs than employers from larger establishments. Regardless of size, those employers who have adapted some of the practices associated with what have been called `high performance work systems' are more likely to have formal training programs. Employers who have made large investments in physical capital or who have hired workers with higher average education are also more likely to invest in formal training and to train a higher proportion of their workers, especially in the manufacturing sector. There are significant and positive effects on establishment productivity associated with investments in human capital. Those employers who hire better educated workers have appreciably higher productivity. The impact of employer provided training differs according to the nature, timing and location of the employer investments.

Empirical researches prove a relationship between investment in human capital and economic growth, but assessing human capital itself, as well as the effectiveness of relevant investments, presents a practical problem. The article is aimed at specifying scientific approaches to generalization of investment objects, components and schemes of human capital formation for the development of a modern theoretical ground for the development of investment in the human capital of the country’s economy. To achieve this aim, the article sets a task of research on types of capital, their content characteristics, structure of human capital, investments in human capital for the needs of management of the national economic system. Important for human capital research is that investments in human capital ensure the growth of the value of human labor, and this is the most important factor in the transformation of the economy, modernization of economic institutions. By this provision is stated that economic growth is not only achieved through technology transfer, investment in physical capital and accumulation of knowledge, but also depends on human capital, including improving people’s health, reducing crime, providing appropriate social climate and institutions, as well as education. Thus, under such conditions, economic development should be considered not only as an increase in economic growth, but also as an investment in human capital ? in the components of its structure. A system-component approach is substantiated, which, unlike the existing one, defines the composition of the structure of human capital and types of investments in human capital, strengths and weaknesses, opportunities and threats of investing in human capital as the main element of productive forces.

Россия является страной с большим населением, однако проблема нехватки квалифицированных кадров по-прежнему остается актуальной. Как превратить количественные преимущества в качественные преимущества, стало основным содержанием стратегии развития человеческих ресурсов нашей страны. Исследования в области человеческих ресурсов и инвестиций в человеческий капитал все чаще занимают важное место в экономическом и социальном развитии. Благодаря анализу человеческих ресурсов, необходимо прогнозировать, увеличивать инвестиции в человеческий капитал, создать массу человеческих ресурсов и добиться разумного распределения человеческих ресурсов. В частности, при формулировании инвестиционной стратегии предприятия должны основываться на реальности, ориентироваться на будущее, разумно распределять пропорции инвестиций в физический и человеческий капитал, повышать основную конкурентоспособность предприятия и способствовать максимизации экономических выгод. Russia is a country with a large population, but the problem of a shortage of qualified personnel remains relevant. How to turn quantitative advantages into qualitative advantages has become the main content of our country's human resource development strategy. Research in the field of human resources and investment in human capital increasingly occupies an important place in economic and social development. Through the analysis of human resources, it is necessary to predict, increase investments in human capital, create a mass of human resources and achieve a reasonable allocation of human resources. In particular, when formulating an investment strategy, enterprises should be based on reality, focus on the future, reasonably distribute the proportions of investments in physical and human capital, increase the basic competitiveness of the enterprise and maximize economic benefits.

Labor productivity is an important determinant of the wealth of national economies and standards of living, as its growth explains half of per capita GDP growth. We show that there are four worlds of productivity growth among industrialized countries, by decomposing labor productivity growth into multifactor productivity (MFP) growth and capital deepening. The four worlds that emerge from the analysis are: 1) human capital investment and MFP growth-dominant Nordic coordinated market economies (CMEs); 2) physical capital investment- and labor productivity growth-dominant liberal market economies; 3) continental CMEs whose moderately high human capital investments create decently high MFP growth, but whose low physical capital investments push down their labor productivity; and 4) South European countries with both low human capital investment and low productivity growth. The four worlds are a result partly of the countries’ human capital formation policies and economic growth strategies — different policies add differently to the components of labor productivity. Overall, we tie welfare production regimes to economic outcomes by showing that different human capital formation policies produce different economic outcomes.

The article discusses the basics of building a system of tax incentives for investments in human capital, capable of ensuring economic growth of the Russian Federation. The relevance of this issue is explained by three circumstances: first, investment in human capital is a key tool for protecting workers from the adverse effects of automation; second, human capital accumulation is closely correlated with income inequality and poverty levels; third, it is a key factor in stimulating rapid economic growth. The purpose of the study is to work out directions of development of tax incentives for investments in human capital on the basis of review and systematization of domestic and foreign literature. In accordance with the goal, the following tasks are defined: to identify areas of taxation influence on human capital formation; to formulate the principles of tax stimulation of investments in human capital; to characterize the tax instruments stimulating growth of investments in human capital; to highlight the state approaches to tax stimulation of investments in human capital of individuals. The scientific literature in the field of human capital development and tools for its regulation was analyzed, and the use of tax incentives was substantiated. The principles of tax stimulation of investments in human capital are formulated and described: the principle of risk minimization, the principle of multidirectionality by subjects of stimulation, the principle of differentiation by types and forms of human capital, and the principle of systemic measures of state support. The study presents three groups of tax incentives focused on the identified areas of impact and taking into account the formulated principles of stimulating investments in human capital.

In the era of knowledge-driven economy, the human capital plays a more and more important role in economic development and enterprise development. The human resource becomes the primary factor in enterprise development; it is related to the improvement of enterprise core competitiveness and also related to enterprise survival and development. This paper briefly explains the concept and main features of investment in human capital, points out the important significance of investment in human capital for large-sized enterprises, and proposes the strategies for improving the enterprise investment in human capital on the basis of analysis on current situation of human capital of domestic large-sized enterprises.

This study offers a comprehensive examination of economic growth and convergence in the Indian States and Union Territories (U.T.) over the period from 1991 to 2020. It investigates absolute, sigma, and conditional convergence within this diverse set of states and utilizes the augmented Solow and extended Solow models to explore conditional convergence dynamics. The empirical findings reveal several significant insights. First, there is no substantial negative correlation between the initial per capita GDP ratio and the average annual growth rate, indicating the absence of absolute convergence across the Indian States and U.T. economies during the study period. These results align with those obtained from sigma convergence analysis, reinforcing the absence of widespread convergence. However, conditional convergence is observed, as evidenced by the rate of conditional convergence (coefficient of initial GDP per capita) estimated at 0.038 among the Indian States and U.T. The presence of conditional convergence implies that while initial conditions matter, other factors, including physical and human capital, population growth, and additional variables, significantly contribute to the growth and convergence of Indian regions. The study concludes that policies aimed at promoting economic growth in the Indian States should prioritize the expansion of the labor force, investments in physical and human capital, and prudent government consumption. Furthermore, fostering an environment that encourages access to new technologies and ideas, maintaining sound macroeconomic management, and increasing investments in human capital formation are essential for sustained growth. Effective resource allocation through prudent budgetary policies and heightened investments in the health sector are recommended. Incentives to reduce fertility rates and adept monetary policy management are also identified as crucial elements for ensuring stability and sustainable growth. In summary, this research underscores the importance of adopting a holistic approach to foster economic growth and convergence in the Indian States. The suggested policy measures create a conducive environment for sustained development and prosperity in this diverse and dynamic region.

Labor productivity is an important determinant of the wealth of national economies and standards of living, as its growth explains half of per capita GDP growth. I show that there are four worlds of productivity growth among industrialized countries, by decomposing labor productivity growth into multifactor productivity (MFP) growth and capital deepening. The four worlds that emerge from the analysis are: (1) human capital investment- and MFP growth-dominant Nordic countries; (2) physical capital investment- and labor productivity growth-dominant liberal countries; (3) continental European countries whose moderately high human capital investments create decently high MFP growth, but whose low physical capital investments push down their labor productivity; and (4) South European countries with both the lowest human capital investment and lowest productivity growth. The four worlds are a result partly of the countries’ partisan politics, economic growth strategies, and human capital formation policies – different policies add differently to the components of labor productivity.

The research literature presents a strong positive relationship between economic development and human capital, which is usually measured by education. The standard approach assumes that an individual invests some time in education, and then it shows up in terms of enhanced future earnings as a return, i.e. investment in education helps to increase the individuals’ future earnings. How much to invest in education is one of the most important economic decisions that individuals have to face. Hundreds of studies in many different countries and time periods have confirmed that better-educated individuals earn higher wages, suffer less unemployment and work in more prestigious occupations, have other social returns like honour and status than their less-educated counterparts. This positive correlation between education (schooling) and earnings is well established in the empirical literature. Despite the fact, that the rate of return to education (human capital) has been widely studied in the world since the late 1950s and even though hundreds of papers have studied this issue in various countries at different time periods and with alternative estimation methods, studies concerning Lithuania’s case remain limited. This study focuses on the evaluation of investments in human capital. Problem question raised: Once education, which plays a very important role in development and growth of a country, is treated as an investment, the immediate natural question is: what is the profitability of this investment comparing to alternatives? Therefore it is important to investigate the return to investment in education in order to evaluate effectiveness of investments in human capital in Lithuania and compare it to the other countries in the development process. The object of the research – the return to investment in human capital. The aim of the research is to estimate the private rate of return to human capital in Lithuania and to study the changes of these returns during the time (2003-2011) and compare calculated data with analogical data in other countries. In the first part of the paper the concept of “human capital” is defined, before estimating the returns to human capital. In order to reveal the return to investment in human capital, it was limited to investment in education overview. Further, the research methodology is presented. One of the main ways to calculate the rate of returns to investment in human capital, which is used in the empirical practice, is the “full-discounting” or “elaborate” method, which consists in calculating the internal rate of return, was employed. 2003-2011 statistical data were used for the study. The conclusions reveal that the rate of return to investment in human capital varies over time and rate of return for females is lower than for males. The rate of return of investment in human capital varies, reflecting the effect of constantly decreasing income tax, average wage and cost changes of higher increments of education (increase / decrease). After comparing Lithuania’s and other countries’ rate of return on investment in human capital, it is seen that private rate of return in Lithuania is similar to Denmark, Spain, Finland, Germany and USA. Compared to neighbour countries Latvia and Estonia, the return on investment in human capital is also similar to that in Lithuania. DOI: http://dx.doi.org/10.5755/j01.ee.24.3.2957

Models of endogenous economic growth can generate long-term growth without relying on exogenous changes in technology or population. A general feature of these models is the presence of constant or increasing returns in the factors that can be accumulated. I use some models of this type to study the determination of per capita growth, investment in physical and human capital, and population growth. The determinants of these variables involve aspects of government policy - including public infrastructure services, maintenance of property rights, government consumption, and taxation - and the initial level of per capita income. I examine the predicted relationships by using a cross-country sample that expands on the Summers-Heston set of about 120 countries. Aside from their data on levels of per capita GDP and the breakdown of GDP into components, I have added information about the composition of government expenditures, proxies for economic freedom and property rights, measures of political stability, and so on. This expansion in variables reduced the number of countries to 72. The findings verify some of the predictions about the determination of growth and investment/saving rates. For example, government consumption and investment spending, and proxies for economic freedom show up as suggested by the models. Also, the interplay among population growth, investment in human capital (school enrollment), and the initial level of per capita income confirm theoretical predictions about the tradeoff between the quantity and quality of children. I anticipate that additional results will emerge from my ongoing research in this area.(This abstract was borrowed from another version of this item.)

This article studies the efficacy of the public investment in human capital and physical capital to raise income in Bangladesh over the period 1980–2016. This article also assesses whether the investment in human capital and income have raised life expectancy of the country. The Johansen cointegration test identifies a long-run relation of income with investment on education, health care and physical capital. The error correction mechanism (ECM) based on the cointegrating relation followed by the Wald test of Granger causality has found that these investments have caused income to rise with some lag periods. Robustness of these findings is confirmed by involving an autoregressive distributed lag (ARDL) model of cointegration followed by its ECM representation. On the other hand, the Johansen and ARDL methods of cointegration followed by their ECMs have also found a long-run relation of life expectancy with the investment in education, health care and income. A decisive role of the investment in health care and income on life expectancy is observed, while an unusual negative role of the investment in education is also found. However, positive value of the long-run coefficients of the education and health-care investments of the ECM-ARDL model indicate some long-run favourable impact of these investments on life expectancy in Bangladesh. JEL: I26, I15, C32

This paper investigated the impact of education tax and investment in human capital on economic growth in Nigeria utilizing the Non-Linear Autoregressive Distributed Lag Model of cointegration covering the period of 25 years from 1995 to 2019. The findings reveal that education tax and investment in human capital have positive and significant effect on the growth of the Nigerian economy over the sampled period. The paper recommends that in order to boost the economy, Nigeria would need to, among other policy frameworks, provide a suitable environment for ensuring macro-economic stability through effective utilization of income from education tax that will encourage increased investment in human capital in the public sector. In addition to income from education tax, for effective and speedy economic growth and development in Nigeria, the government, beneficiaries (students/parents), employers of labor and other stakeholders in the society should share the responsibility for financing primary, secondary and tertiary education, so as to provide a solid foundation for human capital development. However, as revealed in this paper, the contribution of education tax and investment in human capital is most likely to be realized over a long-run period than in the short term. Keywords: Education Tax; Investment; Human capital; Economic growth

We study a two-sector economy with investments in human and physical capital and imperfect labor markets. Human and physical capital are heterogeneous. Workers and firms endogenously select the sector they are active in, and choose the amount of their sector-specific investments in human and physical capital. To enter the high-skill sector, workers must pay a fixed cost that we interpret as direct cost of education. Given the distribution of the agents across sectors, at equilibrium, in each sector there is underinvestment in both human and physical capital, due to non-contractibility of investments. A second source of inefficiency is related to the self-selection of the agents into the two sectors. It typically induces too many workers to invest in education. Under suitable restrictions on the parameters, the joint effect of the two distortions is that equilibria are characterized by too many people investing too little effort in the high skill sector. We also analyze the welfare properties of equilibria and study the effects of several tax-subsidy policies on the total expected surplus.