Impact of Human Capital Inequality on Total Factor Productivity in China

Chongyi Gong

doi:10.4236/me.2016.75061

Abstract

This paper investigates the impact of human capital inequality on Total Factor Productivity (TFP) in China. Approaching this question in dynamic panel data over 18 years and 29 provinces with first-order difference GMM and system GMM estimators reveals: human capital inequality has a significant negative effect on TFP, and high-quality human capital has a significant positive effect on TFP.

Highlights

Since 1978, China’s economy has maintained a rapid growth of more than 30 years
From the theoretical and empirical analysis, this paper finds that the mechanism of human capital affect Total Factor Productivity (TFP) is that “high-quality human capital has a positive effect on TFP by affecting technology innovation, and human capital inequality has a negative effect on TFP by affecting technology diffusion”
This paper points out the mechanism of human capital affect TFP is that “high-quality human capital has a positive effect on TFP by affecting technology innovation, and human capital inequality has a negative effect on TFP by affecting technology diffusion”

Summary

Introduction

Since 1978, China’s economy has maintained a rapid growth of more than 30 years. The total economic output ranks second in the world. It should be noted that China’s economic growth is mainly dependent on factor inputs of capital, energy, resources and labors, and the contribution of total factor productivity is small At this stage, China’s economic problem has become increasingly apparent, such as the excessive consumption of resources, environmental deterioration, and low industrial structure. The innovations of this paper are as follows: First, using first-order difference GMM and System GMM estimation to analysis the data of 29 provinces in China from 1996 to 2013, finding that human capital inequality has a significant negative effect on TFP. In China, which is in the critical period of transformation of economic growth mode, a correct understanding of the impact of human capital inequality on TFP, can be better to develop human capital policies to promote TFP growth, in order to realize the sustainable growth of China’s economy. This paper is structured as follows: the first part is the introduction; the second part is the models, variables and data; the third part is the empirical analysis results; the fourth part is the conclusion

Models

Human Capital Inequality

Total Factor Productivity

Results

Conclusions

Policy Recommendations