Positive feedback in skill aggregation across Chinese cities

Abstract

ABSTRACT This paper examines whether human capital levels diverged across Chinese cities between 1990 and 2010. By employing a series of instruments for the initial human capital share, consistent positive feedback between current human capital levels on the subsequent growth of human capital in the 2000s is found. The findings are also robust to alternative instrumental variables. Further evidence suggests that a city's industry structure does not explain the positive feedbacks, but rather urban amenities appear to be the primary causal factor. To mitigate large provincial inequality in development, China should mitigate growing differentials in human capital by improving local urban amenities.