China Human Capital Report 2012
Executive Summary
Although the importance of human capital in economic growth and innovation is well recognized, constructing an accurate measure of human capital is still a difficult research agenda for three main reasons. First, the characteristics of human capital make it hard to evaluate. Second, required data are hard to obtain. Third, data collection and cleaning are time-consuming and challenging.
Considering the features of Chinese data, 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. According to the human capital theories, we also modified the J-F approach to combine micro data with the macro data. This significantly improves the feasibility and rationality of applying the J-F approach to China. In this way, we construct systematical measurement of Chinese human capital at both national and provincial level, and various human capital indexes.
In this report we calculate the national human capital stocks of China from 1985 to 2009. Total human capital and human capital per capita are calculated for the same period by gender and region(Urban and Rural). In addition, human capital stocks are estimated for 17 provinces: Beijing, Liaoning, Shanghai, Jiangsu, Anhui, Shandong, Henan, Hubei, Hunan, Guangdong, Guizhou, Gansu, Tianjin, Heilongjiang, Zhejiang, Guangxi and Shaanxi. We also construct several provincial human capital indexes and analyze their trends. All the results are collected as the China Human Capital Database. The panel data nature of this database can help future empirical researches on China’s Human capital.
The main findings and conclusions are summarized below (real values are calculated using 1985’s currency and growth rates are calculated based on real values).
1. China’s human capital reached 598.4 trillion Yuan in 2009. Urban and rural human capital was 428.7 and 169.7 trillion Yuan, respectively, accounting for 72% and 28% of the total human capital.
2. China’s human capital increased at an average annual rate of 7.20% during 1985-2009. This growth accelerated after 1995, with a growth rate of 2.26% for 1985-1994 and 10.16% for 1995-2009.
3. Human capital per capita reached 541.5 thousand Yuan in 2009. Urban and rural human capital per capita was 820.8 and 291.1 thousand Yuan, respectively. Male and female human capital per capita were 658.3 and 410.3 thousand Yuan respectively.
4. Per capital human capital almost increased five-fold during 1985-2009. Total human capital grew at a higher rate than human capital per capita before 1995 (2.26% and 1.10% average annual rate, respectively), but the two grew at closer rates after 1995 (10.16% and 9.91%, respectively). Population grew at an average annual rate of 1.38% before 1995 and 0.72% after 1995. Thus, the result suggests that human capital growth was mainly caused by education improvement and other factors, in addition to population growth after 1995.
5. During 1985-2009, rural human capital grew at an average annual rate of 4.20%, but urban human capital grew at 9.66%. Growth rate in both urban and rural areas accelerated since 1995 (13.19% and 6.01%, respectively for 1995-2009). 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 5.16% during 1985-2009, while it was 6.18% in urban for the same period. Before 1995, the rural human capital per capita grew slightly faster than the urban area (0.70% and 0.65%, respectively). After that, however, the urban human capital per capita grew much faster than the rural area (9.51% and 7.83%, respectively). Clearly, the region 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 began to climb slowly, indicating a relatively higher growth rate of human capital relative to physical capital in later years.
8. During 1985-2009, the ratio of labor force human capital (LFHC) including students to total human capital increased, indicating aging of population, in part due to the one child policy. However, the ratio of LFHC excluding students to total human capital decreased in the urban area but increased in the rural area. This phenomenon is likely caued by the rapidly growing share of students in the urban population due toexpansion of education.
9. At the national level, the ratio of GDP to human capital shows an upward trend, suggesting increased efficiency of human capital.
10. 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.
11. Among the 17 provinces estimated, the top three provinces ranked by human capital stock in 2009 are Guangdong, Jiangsu and Shandong; and by human capita per capital are Shanghai, Zhejiang and Beijing.
12. While China has a large total human capital stock, its human capital per capita is relatively small compared to developed countries.