Human Capital And Material Capital Double Under The Deepening Of Agricultural Development

Human capital theory and dual economy model provide basic framework for analyzing agricultural development. However, empirical research is not always consistent with theoretical analysis. Although most studies support the hypothesis that human capital has a positive effect on agricultural productivity, several results suggest there is no or a negative effect on output, which does not provide evidence to support the conventional theory. The main purpose of this study is to investigate how human capital affects agricultural growth.This thesis presents a endogenous growth model of agricultural growth in which the relationship of human capital and growth is a nonlinear approach. The model indicates agricultural growth mainly depends on the level of human capital. There is surplus or redundant labor in traditional agriculture, which means the engine of economic growth relies largely on its physical capital rather than human capital, only when the disguised unemployment disappeares with a transfer of labor from agricultural sector to modern industry, and human capital accumulation reaches a certain threshold level, does human capital become as great as or greater than physical capital. As a result, the long-run growth of agriculture depends on improvement of total factor productivity based largely on human capital. Under these assumptions multiple equilibria may occur, economy may be trapped in a low-level equilibrium and agriculture will sustain a high growth equilibrium, characterised by a high productivity, once it reaches the threshold of human capital.To test these hypotheses, panel model and threshold regression approach are used, respectively. Panel data from several developed countries imply that there is an inverted U-shaped relationship between agricultural growth and physical capital measured by fertilizer. The results of threshold estimates suggest the pattern of agricultural growth is marked by threshold of human capital using regional data of China, and empirical study shows the provinces beyond the threshold level of human capital are mainly in the eastern and central regions, while other proviences are located in western region, which is supported by the fact of China. This study could help to explain the conflict between the facts and conventional human capital theory.The conclusion of this study is the factors that are essential for one period are not necessarily essential for another. Human capital and physical capital are both resources of agricultural growth, the relative contribution of factor varies by the stage of economic development. Physical capital is the key factor of traditional agricultural output, and the effect of human capital on agricultural growth depends on its level. Based on the theoretical analysis and empirical results, implications are provided. Firstly, try to stimulate the deepening of human capital in rural area. In this paper, agricultural sustainable development is determined by its human capital level, therefore it is vital to improve the human capital level of agricultural labor theoretically and practically. Secondly, reform agricultural system properly. Institutions do matter. The institutions that are suitable for agricultural growth of China in the late of20century has not been appropriate gradually. Institutional adjustments should be made to maintain long-term growth, since appropriate institutions are the basic of development.