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 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 calculatethe 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, Zhejiang, Shanghai, Jiangsu, Anhui, 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 findingsare 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 trillionin 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 femaleis 771.4and483.4 thousand, 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 increasingever after.
6. Rural human capital per capita grew at an average annual rate of 4.95% during 1985-2010, while it was 5.57% 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 (11.50% and 9.49%, 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 to riseslowly, 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 22provinces 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.