Analysis Of The Effects Of Human Capital In Economic Growth In The West

The rapid growths in those developed countries and other emerging economies prove that human capital is one of the most important engines of economic growth. Limiting resources, environmental pollutions and the problem of unbalanced regional development have restricted the long term economic development in Western China. So it is clear that we have to pay much more attention to the important role of human capital in regional economic developing.This article follows Lucas' idea of identifying the internal and external effects of human capital. The former one raises the efficiency of individual workers; and other one which can not affect economic growth directly helps to enhance productivities of other factors. In order to introduce variables step by step, we build the "Effective Labors Model", the model of "Human Capital's External Earning" and the "Human Capital Externalities Model". According to the provincial panel data of Western China (1997～2007), we use these models mentioned above to analyze the correlations between human capital and western economic growth.The empirical results show that human capital promotes western economic growth with both internal and external effects. The contribution of internal effect would be undervalued if human capital externalities are neglected. Similarly the external effect can not play its role separately too. Although human capital does influence western economic growth, it makes a very small contribution. For contribution rates of the internal and external effects are 1.36% and 1.04%, both of which are below the national level as well as the average level in Eastern regions. Plenty of reasons cause this problem, such as neglects of human capital and its external effect, the inadequate investment in education and the brain drain. In this regard, we have to pay more attention to the effects of human capital, and take more effort to promote both of the quantity and quality of human capital in Western China.