Powering High-Quality Development: High-End Manufacturing, Human Capital Allocation, and Economic Growth

Zhu Lan*1, Wu Ziwei2, Wang Yong3

1 Institute of Quantitative and Technological Economics, Chinese Academy of Social Sciences (IQTE-CASS),

Beijing, China

2 National Council for Social Security Fund (NCSSF), Beijing, China

3 Institute of New Structural Economics (INSE), Peking University, Beijing, China

Abstract: By comparing the growth trajectories of East Asia and Latin America, this study finds that during industrialization, East Asian economies actively advanced their manufacturing sectors toward high-end production and achieved a higher relative density of high-skilled labor within this sector. In contrast, Latin American economies experienced a “low-end lock-in” in manufacturing, with highskilled labor more heavily concentrated in the service sector. To provide a unified explanation of these patterns of industrial transformation and labor allocation, this paper develops a three-sector general equilibrium model that includes basic manufacturing (BM), high-end manufacturing (HM), and services, and incorporates labor heterogeneity. The model captures how, under different development thresholds for HM, the allocation of high-skilled labor across sectors leads to two distinct structural transformation paths: from BM to HM, or from BM to services. These paths, in turn, generate different trajectories of human capital accumulation and economic growth performance. Simulation analysis shows that dynamically adjusted industrial policies are more effective than static ones, and that combining education policy with industrial policy yields better outcomes than either policy alone. This study extends theoretical research on industrial structural transformation, highlights the importance of HM for latecomer economies, and offers theoretical underpinnings and decision-making insights for advancing new industrialization and deepening integration between industrial and talent chains.

Keywords: high-end manufacturing; human capital allocation; industrial structural

JEL Classification Codes: F401

DOI: 10.19602/j.chinaeconomist.2026.01.02