Human Capital Estimates in China: New Panel Data on China by Provinces 1985-2010 Haizheng Li School...
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Human Capital Estimates in China: New Panel Data on China by Provinces 1985- 2010 Haizheng Li School of Economics Georgia Institute of Technology Email: [email protected]Qinyi Liu School of Economics and Trade Hunan University Bo Li China Center for Human Capital and Labor Market Research Central University of Finance and Economics Barbara Fraumeni Muskie School of Public Service University of Southern Maine Xiaobei Zhang School of Economics Zhejiang University of Finance and Economics 中中中中中中中中中中中中中中中 China Center for Human Capital and Labor Market Research
Human Capital Estimates in China: New Panel Data on China by Provinces 1985-2010 Haizheng Li School of Economics Georgia Institute of Technology Email:
Human Capital Estimates in China: New Panel Data on China by
Provinces 1985-2010 Haizheng Li School of Economics Georgia
Institute of Technology Email:
[email protected]@econ.gatech.edu Qinyi Liu
School of Economics and Trade Hunan University Bo Li China Center
for Human Capital and Labor Market Research Central University of
Finance and Economics Barbara Fraumeni Muskie School of Public
Service University of Southern Maine Xiaobei Zhang School of
Economics Zhejiang University of Finance and Economics China Center
for Human Capital and Labor Market Research
Slide 2
Human capital The knowledge, skills, competencies and
attributes embodied in individuals that facilitate the creation of
personal, social and economic well-being --OECD, 2001 Importance of
Human Capital A central determinant of economic growth Significant
contributions to 30 years economic growth in China Enhances the
ability in Developing technological innovations Adapting and
implementing technologies developed Reduce poverty and inequality 2
China Center for Human Capital and Labor Market Research
Slide 3
Human capital Importance of Human Capital Measurement Trace the
distribution and dynamics of human capital Aid empirical studies
and policy analysis Promote the creation of human capital satellite
account 3 China Center for Human Capital and Labor Market
Research
Slide 4
Human capital measurement Challenges The unique characteristics
make it difficult to estimate its value Partial measurements like
education are commonly used Lack of data existing method cannot be
applied to China Arduous work for data collection, processing and
calculation, especially at provincial level Empirical researches
desire panel data of human capital o Panel data of comprehensive
measures of human capital at a state or province level are lacking
for most countries including China 4 China Center for Human Capital
and Labor Market Research
Slide 5
Research team and sponsors Research Team (starting in 2008)
China Center for Human Capital and Labor Market Research (CHLR)
special-term faculty, full-time faculty, doctoral and Masters
student, and staff Sponsors National Natural Science Foundation of
China Central University of Finance and Economics 5 China Center
for Human Capital and Labor Market Research
Slide 6
Methodology Jorgenson-Fraumeni Lifetime Income-based Approach
Include all aspects of human capital services measured by market
value Widely used in measuring a nations total human capital stock
Argentina (Coremberg, 2010), Australia (Wei, 2007, 2008), Canada
(Gu and Wong, 2009), India (Gundimeda et al., 2007), New Zealand
(Le, Gibson, and Oxley, 2005), Norway (Liu and Greaker, 2009),
Sweden (Ahlroth, Bjorkland, and Forslund, 1997), United Kingdom
(OMahony and Stevens, 2004 and Jones and Chirpanhura, 2010), and
the United States (Christian, 2010) The OECD human capital
consortium OECD, 2010; Mira and Liu, 2010; Liu, 2011 Chinas
national level human capital Li et al., 2010; Li, Liang et al.,
2013 6 China Center for Human Capital and Labor Market
Research
Slide 7
Methodology Jorgenson-Fraumeni lifetime income-based approach
Calculate human capital stock for each individual as the estimated
present value of expected future lifetime earnings Backward
recursive estimation beginning with the oldest covered age Divide
life cycle into five stages Retirement, Work-only, Work-school,
School-only, Pre-school Modifications Incorporate the Mincer model
(National level) Expand Mincer model to include macro-variables
(Provincial level) Derive total human capital stock separated by
urban and rural in estimation Adjustment for cross-province
comparison with a living cost adjustment index 7 China Center for
Human Capital and Labor Market Research
Slide 8
Augmented Mincer model Lack of data in China use the Mincer
model to estimate earnings Extended model for earnings in provinces
ln(inc)= 0 + 1 ln(Avwage)+ 2 Sch+ 3 Sch Avgdp+ 4 Sch Ratio+ 5 Exp+
6 Exp 2 +u ln(inc): the logarithm of earnings Sch: years of
schooling Exp: years of work experience Avwage: average wage of a
province Avgdp: provincial GDP per capita Ratio: provincial primary
industry employment proportion of the total labor force u: random
error 8 China Center for Human Capital and Labor Market
Research
Slide 9
Augmented Mincer model Extended model Avwage reflects the
income gap among provinces Reflect provincial differences in
earnings of those with no schooling and no labor-market experience
Avgdp and Ratio capture the provincial economic development stage
and labor market structure Return to schooling is affected by the
development stage and labor market structure (Li 2003, Zhang et
al., 2005, and Yang, 2005) 9 China Center for Human Capital and
Labor Market Research
Slide 10
Data Imputing population by cohort Population data into
4-dimensions National Censuses (1982, 1990, 2000 and 2010) 1%
sample of national population survey (1987, 1995 and 2005)
Provincial Statistical Yearbooks (1982-2010) Age distribution &
Enrollment rates The China Health and Nutrition Survey (CHNS 1989,
1991, 1993, 1997 and 2000) The Chinese Household Income Project
(CHIP 1995) The China Education Statistical Yearbook (2003-2010) 10
China Center for Human Capital and Labor Market Research
Slide 11
Data Estimating Mincer parameters Micro: Annual Urban Household
Survey (UHS 1986-1997) China Health and Nutrition Survey (CHNS
1989, 1991, 1993, 1997, 2000, 2004, 2006 and 2009) Chinese
Household Income Project (CHIP 1988, 1995, 1999, 2002 and 2007)
Chinese Family Panel Studies (CFPS 2009) China Household Finance
Survey (CHFS 2010) Macro: provincial statistical yearbooks
(1982-2010) Growth rate & Employment rate Provincial
statistical yearbooks (1982-2010) Discount rate 4.58% --used by
Jorgenson and Fraumeni (1992a) and the OECD consortium (OECD 2010)
11 China Center for Human Capital and Labor Market Research
Slide 12
Results--Human Capital panel data Provide provincial human
capital panel data 22 provinces/cities Guangdong, Jiangsu,
Shandong, Henan, Hubei, Hunan, Anhui, Shanghai, Liaoning, Beijing,
Guizhou, Gansu, Tianjin, Heilongjiang, Zhejiang, Guangxi, Shaanxi,
Hainan, Jiangxi, Jilin, Chongqing, Sichuan 1985-2010 cover most of
the reform era Total human capital(HC), Per capita HC, Labor force
human capital(LFHC), Average LFHC Urban/rural, Education, Age,
Gender 12 China Center for Human Capital and Labor Market
Research
Slide 13
Total human capital(HC) Human capital reserve population aged
0-15 (have not entered the labor market) full-time students aged
16+ (not in the labor force) Human capital in use non-retired
population aged 16+ and in the labor force The average annual
growth rate lower than the growth rate of the Chinese economy much
faster in the latter period Similar change happens at urban/rural,
education, age, gender 13 1985-20101985-19941995-2010 6.4%1.2%9.3%
China Center for Human Capital and Labor Market Research
Slide 14
Table 1 Descriptive Statistics for Human Capital 14 Sample Mean
Variable 1985199520052010 Total human capital (Billion RMB)
1,6021,7224,7238,177 Of: Urban 6267653,1275,954 Rural
1,0231,0031,6732,328 Male 9871,0853,0405,354 Female
6156381,6832,822 Age 0-15 (human capital reserve) 8608762,1603,273
Age 16-59 (labor force human capital including students)
7428462,5634,903 China Center for Human Capital and Labor Market
Research
Slide 15
Total human capital(HC) Urban-rural Urban increase by 8.5
times; rural 1.3 times from 1985 to 2010 Urban/rural o 60-76% in
1985-1995 2.6 times in 2010 Fast urbanization in China Increasing
educational attainment gap Gender Annual growth: male 6.6% ; female
6.1% Male/total: 61.6% in 1985 65.5% in 2010 Rising gender ratio of
male for Chinas one-child policy Rising gender inequality in
educational attainment 15 China Center for Human Capital and Labor
Market Research
Slide 16
Total human capital(HC) Age (Figure 1)Figure 1 Human capital
reserve (aged 0-15) : Its ratio in total: 54% in 1985 40% in 2010
Its population share in total: 39% in 1985 23% in 2010 Labor force
age human capital(aged 16-59, including students): Its ratio in
total: 46% in 1985 60% in 2010 Its population share in total: 61%
in 1985 77% in 2010 16 China Center for Human Capital and Labor
Market Research
Slide 17
Figure 1 Human Capital for Different Cohorts-Provincial Average
17 China Center for Human Capital and Labor Market Research
Slide 18
Total human capital(HC) Age (Figure 2)Figure 2 Labor force
human capital(16-59, excluding students) o The share in total
declined since 2000, increase starts at 2005 o Full-time
students(aged 16-59) in school increase Its share in labor force:
grows from 2.9% in 1985 to 6.9% in 2010 Due to expanded education
opportunities since 1999 18 China Center for Human Capital and
Labor Market Research
Slide 19
Figure 2 Population & Human Capital Share-Provincial
Average 19 China Center for Human Capital and Labor Market
Research
Slide 20
Labor force human capital(LFHC) Trend: Average annual growth in
1985-2010 LFHC grows faster than total HC (fewer young people) 20
%HCLFHCLabor force Total6.46.81.6 Urban8.89.24.3 Rural3.44.30.0
China Center for Human Capital and Labor Market Research
Slide 21
Labor force human capital(LFHC) Education(Figure 4)Figure 4
Human capital share in education: Illiterate and primary: declined
rapidly Junior school remains the largest, and started to decline
since 2006 Senior: flat College or above The highest increase
(close to 20% annual growth) Increased from 1.7% in 1985 to 26.3%
in 2010 much higher than its population share, 12.3% in 2010 o A
rising return to college education documented by Zhang et al.
(2005) 21 China Center for Human Capital and Labor Market
Research
Slide 22
Figure 4 Education Share in Labor Force Human Capital (LFHC) 22
China Center for Human Capital and Labor Market Research
Slide 23
Per capita human capital (PCHC) Measure of the intensity of
human capital Compare the annual average growth rates Since 1995
they grew at a similar annual growth rate Average annual growth
rates of population 1.2% in 1985-1994; 0.6% in 1995-2010 much
slower than the growth of HC HC growth is not driven solely by
population growth 23 China Center for Human Capital and Labor
Market Research
Slide 24
Table 2 Descriptive Statistics for Per Capita Human Capital 24
Sample Mean Variable 1985199520052010 Per capita human capital
(Thousand RMB) 4946121202 Of: Urban 7365165267 Rural 403677116 Male
5855148247 Female 403690150 Age 0-15 (human capital reserve)
6971221382 Age 0 (Average lifelong income for new-born) 7678247407
China Center for Human Capital and Labor Market Research
Slide 25
Per capita human capital (PCHC) (Table 2)Table 2 Urban/rural
Gap enlarged Rural/Urban: 54% in 1985 43% in 2010 Education (Figure
3)Figure 3 Average years of schooling 5.5 years in 1985 8.8 years
in 2010 Gender Female/male: 69% in 1985 61% in 2010 Age 0-15
Average annual growth PCHC: 6.6%; Population: -1.5% 25 China Center
for Human Capital and Labor Market Research
Slide 26
Figure 3 Average Years of Schooling (Avsch) and Per Capita
Human Capital (PCHC) 26 China Center for Human Capital and Labor
Market Research
Slide 27
Top 5 Provinces for Human Capital in 2010 27 Total human
capital (Billion RMB) Total population 1 Guangdong21,974 Guangdong
2 Jiangsu21,029 Henan 3 Shandong18,386 Shandong 4 Zhejiang15,335
Sichuan 5 Henan13,888 Jiangsu Per capita human capital (Thousand
RMB) Per capita GDP 1 Shanghai378 Shanghai 2 Beijing345 Beijing 3
Zhejiang337 Tianjin 4 332 Liaoning 5 Jiangsu329 Heilongjiang China
Center for Human Capital and Labor Market Research
Slide 28
Average labor force human capital(ALFHC) Urban/rural: Urban:
RMB 167 thousand; Rural: RMB 90 thousand in 2010 Average annual
growth Since 1995, urban ALFHC has grown much faster than rural
Education gap between urban and rural areas Higher labor quality
and thus higher productivity in urban areas, if the age structure
in urban and rural areas were identical urban/rural gap will
continue to rise. 28 %1985-20101985-19941995-2010 Urban4.98.2
Rural4.3-0.26.8 China Center for Human Capital and Labor Market
Research
Slide 29
Top 5 Provinces for Labor Force Human Capital in 2010 29 Labor
force human capital (Billion RMB) 1 Guangdong12,220 2 Jiangsu8,552
3 Zhejiang7,122 4 Shandong6,498 5 Henan5,796 Average labor force
human capital (Thousand RMB) 1 Shanghai263 2 Beijing255 3
Tianjin222 4 Zhejiang206 5 Jiangsu184 China Center for Human
Capital and Labor Market Research
Slide 30
Human capital as a measure of social development--beyond GDP
measures beyond Gross Domestic Product measure of economic and
social progress--Stiglitz Commission report Expected average
lifetime income for newborns rises rapidly It Annual growth rate of
6.7% faster than PCHC (5.6%) Provincial difference: 30 China Center
for Human Capital and Labor Market Research
Slide 31
Figure 5 Ratios of Labor Force Human Capital (LFHC), Physical
Capital (PC), and GDP 31 China Center for Human Capital and Labor
Market Research
Slide 32
Human capital and physical capital LFHC/physical capital
Decreases rapidly across time 12 times in 1985 5 times in 2010
Possible reason: High physical capital investment in China
Increased at an average annual growth of 18.9% during 1992- 1997 32
China Center for Human Capital and Labor Market Research
Slide 33
Human capital and GDP GDP/LFHC Measure of labor use efficiency
Provincial ratio is between 6-11% on average Shows a slow and
stable growth Compared with GDP/physical capital: In the range of
49-66% Decline since 1995 Human capital rises faster than physical
capital in efficiency 33 China Center for Human Capital and Labor
Market Research
Slide 34
Illustration of Data Applications 34 China Center for Human
Capital and Labor Market Research
Slide 35
Table 4 Production function estimation 35 Var.Definition Pooled
OLSFE Labor Human capital Labor Human capital lnKlog(physical
capital)0.647***0.449***0.603***0.533***
(0.007)(0.012)(0.015)(0.037) lnLlog(labor)0.366*** 0.185 (0.021)
(0.183) lnH log(labor force human capital) 0.551*** 0.221***
(0.023) (0.063) Cons -5.376***-13.224***-2.058-4.623***
(0.348)(0.583)(3.056)(1.532) Obs. 546 R2R2 0.9540.9660.9810.986
China Center for Human Capital and Labor Market Research
Slide 36
Illustration of Data Applications Pooled OLS (Table 4)Table 4
LFHC has much higher output elasticity than labor When human
capital is included Smaller elasticity of physical capital, even
smaller than that for human capital Constant returns to scale Fixed
Effects LFHC still has higher elasticity than that of labor
Elasticity of labor and LHFC become much smaller than OLS
Decreasing returns to scale 36 China Center for Human Capital and
Labor Market Research
Slide 37
Illustration of Data Application 37 China Center for Human
Capital and Labor Market Research
Slide 38
Table 5 Sources of Chinas Economic Growth using Solow Growth
Accounting 38 1986-2010 Growth rate (% per year) Output10.29
Physical capital16.48 Labor1.64 TFP (with labor)3.76 Labor force
human capital 7.03 TFP (with labor force human capital) 0.14
Contribution to GDP growth (%) Physical capital53.32 Labor10.69 TFP
(with labor)35.99 Labor force human capital 45.87 TFP (with labor
force human capital) 0.81 China Center for Human Capital and Labor
Market Research
Slide 39
Illustration of Data Application Contributions to economic
growth (Table 5)Table 5 With traditional labor input Physical
capital accounts for 53.3% of growth Economic growth in China has
been mainly driven by physical capital Labor input: 10.7% TFP: 36%
With human capital input LFHC: 45.9% TFP: 0.8% Consistent with
studies that use two-step procedure to estimate how human capital
affect TFP growth 39 China Center for Human Capital and Labor
Market Research
Slide 40
Summary The data provide very rich information in studying
Chinas human capital A comprehensive picture of Chinas human
capital distribution and dynamics Demonstrations of applications of
the new data Estimating a production function Conducting the growth
decomposition exercise using the data Compared the results with the
traditional estimation based on labor inputs The new panel data on
Chinas provincial human capital are quite reliable; and should be a
valuable new resource for related studies and policy analysis 40
China Center for Human Capital and Labor Market Research