The Inheritance of Marketization Level and Regional Human Capital Accumulation: Evidence from China

Abstract

The differences in human capital stock among regions in China have been widening since the mid-1990s, and regional marketization level is a possible determinant of human capital accumulation. Combining a nationwide survey data set at the individual level with more than 40,000 observations and an index of marketization for each province, we find a positive relation between marketization level and individuals’ years of schooling. Moreover, regional marketization levels, in the long run, using instrumental variables estimation can explain about 53% of the differences in average years of schooling among provinces. The findings suggest that a better market environment encourages human capital accumulation, which is an important condition for regional economic prosperity.