The role of human capital in China's economic development: Review and new evidence

We carefully utilize empirical methods and measurement, and find that the effect of human capital on China's economic growth may be indirect through physical capital investment. This result is different than that found for OECD countries and has not been suggested by previous studies. In addition, in determining physical capital investment, workers with college education play a more significant role than those with primary and secondary education, suggesting the possibility of capital-skill complementarity. This finding has implications for China's future regional growth inequality: the inequality may increase rather than decrease, because physical capital investment continues to accumulate faster in the eastern area where the human capital stock is larger and thus leads to greater economic growth in the east.