Although the importance of human capital in economic growth and
innovation is well recognized, constructing an accurate measure of human
capital is still difficult. We adopt the widely used Jorgenson-Fraumeni
lifetime income approach (hereafter referred to as the J-F approach) to
calculate the stock of Chinese human capital by modifying it to fit the
Chinese data.
In this report we calculate the human capital stocks of China at the
national level and for 22 provinces from 1985 to 2010, including total
human capital and per capita human capital for rural and urban, male and
female. The provinces calculated are: Beijing, Tianjin, Liaoning, Jilin,
Heilongjiang, Shanghai, Jiangsu, Anhui, Zhejiang, Jiangxi, Shandong,
Henan, Hubei, Hunan, Guangdong, Guangxi, Hainan, Chongqing, Sichuan,
Guizhou, Shaanxi and Gansu.
Additionally, we estimated national level and provincial level physical
capital stock for the same period; and constructed living cost adjustment
index (i.e., purchasing power parity index) for cross province comparison of
money value. Our estimated human capital, physical capital, living cost
adjustment index and all raw data and processed data will be released for
public use.
The main findings are summarized below (real values are calculated
using1985’s currency and growth rates are calculated based on real values).
1. China’s human capital reached RMB 715.1 trillion in 2010. Urban and
rural human capital was 539.1 and 176.0 trillion, respectively,
accounting for 75% and 25% of the total human capital.
2. China’s human capital increased at an average annual rate of 7.10%
during 1985-2010. This growth accelerated after 1995, with a growth rate of 2.12% for 1985-1994 and 10.84% for 1995-2010.
3. Human capital per capita reached RMB 636.9 thousand Yuan in 2010.
Urban and rural human capital per capita was 939.0 and 320.0 thousand
Yuan, respectively. Per capita human capital for male and female is
771.4 and 483.4 thousand Yuan, respectively.
4. Per capita human capital almost increased five-fold during 1985-2010.
Total human capital grew at a higher rate than human capital per capita
before 1995 (2.12% and 0.97% average annual rate, respectively), but
the two grew at closer rates after 1995 (10.84% and 10.54%,
respectively). In the same period, population grew at an average annual
rate of 1.38% before 1995 and 0.68% after 1995. Thus, the result
suggests that, after 1995, human capital growth was mainly caused by
education improvement and other factors, in addition to population
growth.
5. During 1985-2010, rural human capital grew at an average annual rate of
3.79%, but urban human capital grew at 9.48%. Growth rate in both
urban and rural areas accelerated since 1997 (14.47% and 6.43%,
respectively, for 1997-2010). Urban human capital exceeded rural
human capital starting in 1996, and the gap has been increasing ever
after.
6. Rural human capital per capita grew at an average annual rate of 4.95%
during 1985-2010, while it was 5.77% in urban for the same period.
Before 1997, the rural human capital per capita grew slightly faster than
the urban area (0.82% and 0.53%, respectively). After that, however, the
urban human capital per capita grew much faster than the rural area
(10.62% and 8.76%, respectively). Clearly, the urban-rural gap in
human capital rises quickly.
7. At the national level, the ratio between human capital and physical
capital decreased rapidly before 1995 and then became stable and began III
to rise slowly, indicating a higher growth rate of human capital relative
to physical capital in later years.
8. At the national level, the ratio of GDP to human capital shows an
upward trend, suggesting increased efficiency of human capital in
production.
9. Human capital at the provincial level generally shows a similar trend to
national human capital. However, since provinces differ in their
population, education structure and the degree of market mechanism,
their dynamics in human capital also show some differences.
10. Among the 22 provinces estimated, the top three provinces ranked by
human capital stock in 2010 are Guangdong, Jiangsu and Shandong; and
by human capita per capital are Shanghai, Beijing and Zhejiang.
11. While China has a large total human capital stock, its human capital per
capita is relatively small compared to developed countries.