Field of Study: Labor and Population Economics

 

Human Capital, Factor Productivity and China’s Regional Disparity*

 

Abstract

Postulating differences in factor productivity across regions is a principal reason for China’s regional disparity, we then investigate the determinants of TFP which is a key factor affects factor productivity. Our analyses show that human capital, FDI, infrastructure, the degree of marketization, and urbanization all has positive and significant effects on TFP. However, the differences in the contributions of these factors to TFP are very big across regions. On the whole, for the 1987-2004 period, the east region almost always has the largest contributions of these factors to TFP, which can explain why the east region can develop faster to some extent. By comparison, in the east region, the contribution of human capital to TFP is very important although it is less than that of urbanization and the development of marketization. While TFP benefits more from human capital than any other factors in the central and west regions. Therefore, increasing human capital investment especially in the less developed areas should be an important prerequisite to reducing regional disparity.

Keywords: Human Capital; Productivity; Regional Disparity

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