Essays on human capital and productivity analysis in China

This thesis examines the Chinese economy by focusing on the specialized human capital themes of production processes, regional productivity disparities and convergence, cost competitiveness comparisons and private returns to education from 1978 to 2009. Chapter 2 reviews the growth accounting model and measurement methods of its components such as capital services, labour inputs, labour composition index and Total Factor Productivity index. China’s spectacular economic growth is from unequal performance of provinces and regions. Thus, chapter 3 examines effects of the physical and human capital on disparities and convergence of labour productivity, Total Factor Productivity and average wages in China, incorporating the market reform factors. We find that composition-adjusted human capital is more important than capital services in the production function. We also overcome the endogeneity of schooling in the wage function with instrumental variables. In chapter 4, we discuss industrial disparities and convergence across countries and provinces from labour costs perspective to figure out industries with comparative competitiveness advantage. Moreover, we correct the Heckman selection bias problems of education returns in chapter 5. We find that education returns keep on rising over time, which support human capital hypothesis rather than the signalling effect for all age groups except the group educated during the “Cultural Revolution”.