Human Capital Advanced Investment and Its Effects on Economic Growth

Li Gang(李钢)* and Qin Yu（秦宇）

Institute of Industrial Economics (IIE), Chinese Academy of Social Sciences (CASS), Beijing, China

Abstract: This paper created the Human Capital Relatively Advanced Investment (HCRAI) index to compare human capital investment in China and other countries. The HCRAI comprises life expectancy and average length of schooling adjusted for GDP per capita to measure the degree to which a country has invested in human capital in the early stage. Our study found that in 2014, China ranked much higher on the HCRAI index than on GDP per capita. The fact that China was far ahead of the United States on the HCRAI ranking suggests that China had invested more in human capital. Since the 1970s, China’s HCRAI ranking has experienced an inverted U-shaped curve, increasing at first and ranking first in the world in 1980 before declining in a later stage. That is to say, China has invested somewhat less on human capital in relative terms in the post-reform era. International data comparison showed that the HCRAI index may largely explain a country’s long-term economic growth rate, justifying the continuity in China’s six-decade development before and after reform and opening up in 1978. By replacing the existing absolute indicators with relative indicators, this paper measures the level of human care in China, reflecting the concept of fairness. The international comparison and long-term evolution of the HCRAI index offer a new perspective for the new normal of China’s economy and supply-side structural reforms. China’s declining HCRAI ranking over the past three decades indicates the importance of a more inclusive and sustainable development path that puts human first.

Keywords: human capital, relatively advanced, education, health, long-term growth JEL Classification Code: J24, O47DOI: 10.19602/j.chinaeconomist.2021.11.05

JEL Classification Code: J24, O47

DOI: 10.19602/j.chinaeconomist.2021.11.05