Average Level Of Human Capital Research Articles

Estimating Education and Labor Market Consequences of China’s Higher Education Expansion

China initiated a large-scale higher education expansion program in 1999. During the first three years of the expansion, postsecondary enrollment nationwide doubled. Leveraging the quasi-experimental nature of the program, I link administrative records on province-year level college admission quotas with individuals’ education and labor market information in 2013 from the Chinese Household Income Project, and employ a two-way fixed-effect model to estimate the expansion’s impacts on individuals’ education and labor market outcomes, and then use the expansion-induced variation in college access as an instrument for college education to estimate causal returns to college. Results show that the expansion substantially boosts individuals’ education outcomes, including completed years of schooling, and the probabilities of attending college and obtaining any postsecondary degrees. The expansion also improves individuals’ labor market outcomes, including probability of working, job stability, and hourly wage. My 2-stage least squares estimators imply that returns to education remain substantial in 2013. Returns to attending college and obtaining any postsecondary degrees are estimated to be 54–76 and 59–90 percent respectively. My analysis reinforces that enhanced access to college could raise individuals’ educational attainment and boost nations’ average level of human capital, and eventually benefit their labor market outcomes.

Better School, Better Score? Evidence From a Chinese Earthquake-Stricken County

Abstract Little is known about the long-term impact of postdisaster government support on students’ educational outcomes in selective high schools. Using the instrumental variable approach and administrative education data on an earthquake-affected county, we found that entering a selective high school in a postdisaster government-supported county reduces the college entrance examination scores of students and, thus, their success in attending college. Suggestive evidence showed that the redistribution of educational resources across schools could be a reason for this negative impact of selective schools. We conclude that raising awareness of this educational misallocation problem can be of great importance in improving the average level of human capital in rural areas.

Health capital provision and human capital accumulation

Abstract This article analyses the effect of public policy intervention in the production of health capital on fertility, private investment in children’s health and education, and human capital accumulation. I have used a growth model with endogenous fertility, in which the usual parental trade-off between the quantity and quality of their children is augmented with an additional factor that affects children’s human capital, which is health. I analyse the overall society-wide effect of public policy intervention and derive a condition that determines precisely whether public provision of free health services increases or decreases the average level of human capital in the society.

Health Capital Provision and Human Capital Accumulation

This article analyzes the effect of public policy intervention in the production of health capital on fertility, private investment in children’s health and education and human capital accumulation. I have used a growth model with endogenous fertility, in which the usual parental trade-off between the quantity and quality of their children is augmented with an additional factor that affects children’s human capital, which is health. I analyze the overall society-wide effect of public policy intervention and derive a condition that determines precisely whether public provision of free health services increases or decreases the average level of human capital in the society.

Are shocks to human capital composition permanent? Evidence from the Mariel boatlift

We examine whether shocks to a city’s average level of human capital are associated with persistent or permanent changes in human capital. The Mariel boatlift of 1980 represents an exogenous negative shock to Miami’s average human capital because it attracted a particularly low-skilled mix of immigrants. To assess whether the boatlift affected Miami’s future human capital accumulation, we construct a synthetic control group to analyze the effect of this shock. The results suggest that the Miami metropolitan area experienced slower increases in average human capital than its synthetic control city after the boatlift. This result is robust to alternative estimation strategies, data sets, and alternative hypotheses. The result implies that a decreased level of average skills tends to subsequently attract unskilled skilled workers more strongly than skilled workers, at least in the context of immigration shocks. We discuss plausible mechanisms for this finding and place the findings into the context of the spatial equilibrium model.

MIGRATION, CONGESTION, AND GROWTH

This article analyzes the effect of migration from a less advanced economy to a more advanced economy on economic growth. The analysis is performed in a two-country growth model with endogenous fertility, in which congestion diseconomies are incorporated. The model shows that out-migration increases fertility and reduces human capital in the source economy. At the same time, in-migration reduces fertility and can increase or decrease the average level of human capital in the host economy. I show how migration affects the inter-temporal evolution of human capital in the world economy. I also demonstrate that a tax imposed on immigrants in the host economy can increase human capital accumulation in the receiving and sending economies and the world as a whole.

Beyond the Quantity–Quality tradeoff: Population control policy and human capital investment

The quantity–quality tradeoff theory implies that a reduction in fertility would induce more human capital investment per child, and it is widely believed that population control policy could promote human capital levels in developing countries. China's one-child policy (OCP) has significantly reduced the fertility in the country, and popular belief holds that this policy has contributed to the enhancement in China's human capital since 1979. However, the quantity–quality tradeoff dose not present the complete truth—another crucial factor relates to which segment of the population is reduced, a critical issue that has been ignored in the literature. China's OCP is significantly more strictly implemented in urban areas than in rural areas, where human capital investment in children is significantly lower. This two-tier OCP could have significantly increased the rural–urban fertility ratio and brought about important consequences. We first emphasize the importance of such a population compositional effect, which may offset the potentially positive quantity–quality tradeoff effect on human capital. We present a simple analytic framework and quantify the relative sizes of the quantity–quality tradeoff and compositional effects. We find that the former is dominated by the latter, and that the OCP has reduced the average human capital level of China's next generation by approximately 1–2%. This novel evidence indicates that the conventional wisdom on population control may be incomplete and that its policy implications could be misleading.

A nonlinear relationship between unemployment and human capital - evidence from African countries

This study seeks to examine the validity of the assumption that an increase in the average level of human capital for a country over a specific level will result in replacing workers with technology; and, hence, boost the unemployment rate. Using data for 37 African countries from 2000 to 2013, the present study seeks first: to determine the short and long run effects of human capital accumulation on the unemployment rate in Africa. Second, to identify the threshold level of human capital whereby a further rise will boost unemployment rate in the continent. The results of the Arellano-Bond (A-B) GMM technique showed that the relatively high unemployment rate is due to the continent's excessive human capital accumulation. Most importantly, the magnitude of this effect is likely to be larger in the long run as compared to the short run. These findings imply that Africa's current education expansion policies will result in further increase in the unemployment rate over time.

A nonlinear relationship between unemployment and human capital - evidence from African countries

This study seeks to examine the validity of the assumption that an increase in the average level of human capital for a country over a specific level will result in replacing workers with technology; and, hence, boost the unemployment rate. Using data for 37 African countries from 2000 to 2013, the present study seeks first: to determine the short and long run effects of human capital accumulation on the unemployment rate in Africa. Second, to identify the threshold level of human capital whereby a further rise will boost unemployment rate in the continent. The results of the Arellano-Bond (A-B) GMM technique showed that the relatively high unemployment rate is due to the continent's excessive human capital accumulation. Most importantly, the magnitude of this effect is likely to be larger in the long run as compared to the short run. These findings imply that Africa's current education expansion policies will result in further increase in the unemployment rate over time.

Migration, Congestion and Growth

This article analyzes the effect of migration from a less advanced economy to a more advanced economy on economic growth. The analysis is performed in a two-country growth model with endogenous fertility, in which congestion diseconomies are incorporated. The model shows that out-migration increases fertility and reduces human capital in the source economy. At the same time, in-migration reduces fertility and can increase or decrease the average level of human capital in the host economy. I show how migration affects the inter-temporal evolution of human capital in the world economy. I also demonstrate that a tax imposed on immigrants in the host economy can increase human capital accumulation in the receiving and sending economies and the world as a whole.

Human Capital of Venture Capital and Investing Performance---Analysis Based on Chinese Marco Data

Based on the macro data from 2006 to 2013 of Chinese venture capital institutions, this paper studies the relationship between the average human capital level and the investment performance and its impact mechanism using factor analysis and regression analysis. The paper finds that the overall performance level of the venture capital industry in China is influenced by different dimensions of human capital in different index, and it is also constrained by the economy developing level and investment environment. For example, in 2008 and 2013 IPO suspended which significantly weakened the influence of human capital (as opposed to individual institutions).

On Sharia’a-compliance, positive assortative matching, and return to investment banking

In their recent paper Derigs and Marzban (2009) argued that Sharia’a-compliant strategies result in much lower portfolio performance than the conventional strategies. The main reason for their argument is of Sharia’a-compliance limits on the set of admissible investments. However, in the world of imperfect financial markets such a limitation may also have some beneficial consequences. We therefore, assume that a net disadvantage caused by such limitations is relatively small, but is magnified by equilibrium hiring strategies, which match Islamic banks with employees who have a lower average level of human capital.

Technology, Trade, and Growth: The Role of Education

We generalize a trade model with firm-specific heterogeneity and R&D-based growth to allow for an endogenous education decision of households and an endogenously evolving population. Our framework is able to explain cross-country differences in living standards and trade intensities by the differential pace of human capital accumulation among industrialized countries. Consistent with the empirical evidence, scale matters for relative economic prosperity as long as countries are closed, whereas scale does not matter in a fully globalized world. Interestingly, however, the average human capital level of a country influences its relative economic prosperity irrespective of its trade-openness. While being consistent with the empirical evidence, our framework has the additional advantage that steady-state growth of income does not hinge on the unrealistic assumption of an ever expanding population.

Eagles and Turkeys: Human Capital Externalities, Departmental Co-authorship and Research Productivity

Lucas (1988) hypothesised that human capital externalities explain persistent productivity growth and become manifest via interactions between workplace colleagues. Consistent with the first part of this hypothesis, Fox and Milbourne (2006) concluded that an increase in the average level of human capital in Australian economics departments raised the research productivity of departmental members. This paper tests the robustness of this finding by using a direct, rather than a proxy, measure of human capital and confirms the existence of human capital externalities within Australian economics departments. But we extend the analysis in two important dimensions. Firstly, we investigate the second part of Lucas' hypothesis by testing whether the externality becomes manifest via co-authoring. We find no evidence that this type of interaction is associated with higher research productivity, especially for higher quality outputs. Secondly, we control for the likely endogeneity of one's peer group via instrumental variables estimation. In this case, we find that the peer group effect disappears completely for the highest quality outputs but remains for research output more broadly defined.

Knowledge intensive business services and their impact on innovation in China

This study investigates the impact of knowledge intensive business services (KIBS) on innovation in China. First, we review the development of KIBS in China by analyzing the agglomeration, utilization, and quality of KIBS. Second, regression techniques are employed to investigate the impact of KIBS on innovation in the Chinese economy. We found that KIBS are becoming a major force in promoting innovation, especially in eastern China. Furthermore, we also found that the effect of KIBS on innovation is highly related to the average level of human capital. Given the findings in this study, we provided some policy suggestions.

Rethinking the brain drain: Dynamics and transition

This paper injects a time dimension into the static, instantaneous adjustment model of Stark (2004). The paper assumes that in response to the incentive conferred by the prospect of migration, the average level of human capital – the source of a productivity-enhancing externality – changes gradually rather than immediately. This might seem to imply that, contrary to what is claimed in Stark (2004), the welfare of the workers who do not migrate, and who early on in the transition period adjust their level of human capital in response to the prospect of migration, declines because these workers do not face a higher average level of human capital. Rather surprisingly, however, the paper finds that the welfare result of Stark (2004) is robust to the relaxation of his assumption of instantaneous adjustment: even “pioneer” workers, who form more human capital in an environment in which the prevailing average level of human capital is approximately at the pre-migration level, are strictly better off when there is a prospect of migration than when there is not.

Growth vs. level effect of population change on economic development: An inspection into human-capital-related mechanisms

This paper studies the different mechanisms and the dynamics through which demography is channeled to the economy. We analyze the role of demographic changes in the economic development process by studying the transitional and the long-run impact of both the rate of population growth and the initial population size on the levels of per capita human capital and income. We do that in an enlarged Lucas–Uzawa model with intergenerational altruism. In contrast to the existing theoretical literature, the long-run level effects of demographic changes, i.e. their impact on the levels of the variables along the balanced growth path, are deeply characterized in addition to the more standard long-run growth effects. We prove that the level effect of the population rate of growth is non-negative (positive in the empirically most relevant case) for the average level of human capital, but a priori ambiguous for the level of per capita income due to the interaction of three transmission mechanisms of demographic shocks, a standard one (dilution) and two non-standard (altruism and human capital accumulation). Overall, the sign of the level effects of population growth depends on preference and technology parameters, but numerically we show that the joint negative effect of dilution and altruism is always stronger than the induced positive human capital effect. The growth effect of population growth depends basically on the attitude to intergenerational altruism and intertemporal substitution. Moreover, we also prove that the long-run level effects of population size on per capita human capital and income may be negative, nil, or positive, depending on the relationship between preferences and technology, while its growth effect is zero. Finally, we show that the model is able to replicate complicated time relationships between economic and demographic changes. In particular, it entails a negative effect of population growth on per capita income, which dominates in the initial periods, and a positive effect which restores a positive correlation between population growth and economic performance in the long term.

Two-sided intergenerational transfer policy and economic development: A politico-economic approach

We consider an overlapping generations model with public education and social security financed by labor income taxation, in which the overall size of these policies is determined in a repeated majority voting game. We investigate the interaction between these policies and economic development in stationary Markov perfect equilibria. In the politico-economic equilibrium, the labor income tax rate is represented as a linear increasing function of the ratio of the decisive voter's human capital and the average human capital level. A high level of initial income inequality reduces the size of public policies and retards economic growth.

A back-door brain drain

The long run effect of migration solely by unskilled workers is that skilled workers in the home country acquire additional human capital yet their share in the country’s workforce falls. Consequently, the country’s average level of human capital is lowered.

Growth vs. Level Effect of Population Change on Economic Development: An Inspection into Human-Capital-Related Mechanisms

This paper studies the different mechanisms and the dynamics through which demography is channeled to the economy. We analyze the role of demographic changes in the economic development process by studying the transitional and the long-run impact of both the rate of population growth and the initial population size on the levels of per capita human capital and income. We do that in an enlarged Lucas-Uzawa model with intergenerational altruism. In contrast to the existing theoretical literature, the long-run level effects of demographic changes, i.e. their impact on the levels of the variables along the balanced growth path, are deeply characterized in addition to the more standard long-run growth effects. We prove that the level effect of the population rate of growth is non-negative (positive in the empirically most relevant case) for the average level of human capital, but a priori ambiguous for the level of per capita income due to the interaction of three transmission mechanisms of demographic shocks, a standard one (dilution) and two non-standard (altruism and human capital accumulation). Overall, the sign of the level effects of population growth depend on preference and technology parameters, but numerically we show that the joint negative effect of dilution and altruism is always stronger than the induced positive human capital effect. The growth effect of population growth depends basically on the attitude to intergenerational altruism and intertemporal substitution. Moreover, we also prove that the long-run level effects of population size on per capita human capital and income may be negative, nil, or positive, depending on the relationship between preferences and technology, while its growth effect is zero. Finally, we show that the model is able to replicate complicated time relationships between economic and demographic changes. In particular, it entails a negative effect of population growth on per capita income, which dominates in the initial periods, and a positive effect which restores a positive correlation between population growth and economic performance in the long term.