Human Capital Accumulation And China's Economic Growth

Mao Zedong, the founder of People's Republic of China, ever said,"Among all the things in the world, human being is the most precious."Our economic development as a nation can be no swifter than our progress in human development. From the perspective of economist, the human development can be measured by the per capita stock of human capital. Human capital is not inherent, but the result of investment in education, job training, health care, nourishment and so on. Human capital can be finally embodied by the value created by knowledge, talent, skill and creativity of workers.As known to all, China is a country of huge population, but still not a great power of human capital. The public education in China has gained impressive accomplishment, however, for the reasons of history and institution, the proportion of education expenditure in GDP is still below the average level in the world. Even worse, the allocation of educational resource is of great discrepancy between the urban and country areas as well as among different regions. The underinvestment of human capital has become one of the knottiest obstacles of China's sustainable development. The ultimate task of socialism is to liberate and develop productivity. Human being is the most active factor of productivity, so it should be paid paramount consideration.Long-term economic growth is the topic that draws more concern from economist than any other ones. This paper starts from the origin of long-term economic growth, and then introduces the evolvement of the concept of human capital in economics, especially in growth theory. From Adam Smith, economist paid great attention to the function of human capital, which was regarded as one of the sources of wealth. Schultz and Gary Becker established the frame work of modern human capital theory. They reckoned that human capital is the fundamental causation of western societies'economic achievement. Endogenic growth theory gives rise to the flourish of human capital. The investment in human capital impels the progress of knowledge. Since the production of knowledge features natural external economy, it can be the origin of increasing return. The introduction of human capital extends the vision of growth theory. The model with human capital variable is closer to the reality and is of stronger explanative power.Human capital is the key to economic growth. However it is not a easy job to measure the human capital stock. The third part bases on the official data from NBSC, combining the cost method and output method, and estimates the human capital stock of China from 1949 to 2005. Our method fully uses the census data as the foot stone and the frame of reference. The estimated human capital stock data is within the error scope of 5 percent compared with that calculated directly for census data, which testify the method is scientific and efficient.On the ground of human capital stock data, we use econometric approach to research the growth model of China and estimate the coefficient related. The empirical research proves that human capital plays crucial role in the economic growth and income distribution in China. Besides, we also calculate the total factor productivity and marginal return of physical capital as well as human capital. As a result, the marginal return of human capital is found too high because of the insufficient investment in human capital.There lies profound reason for the shortage of human capital, from both historical and practical aspects. The following part employs the standard investment theory to discuss the main factors influential in investment decision making process. The accumulation of human capital in China is depressed by the discrepancy in educational resource, deficiency of public education expenditure and distorted labor market. In the conclusion part, we summarize the function of human capital in economic growth and the reasons for human capital underinvestment. We suggest that the unsatisfactory condition can be changed by increasing government education expenditure, distributing the educational resource more evenly, discouraging the social force and accelerating the reform in labor market. To sum up, human capital is the indispensable for China's sustainable economic growth, so it is a pressing task to gather the pace in human capital accumulation.