Passage-Analysis-of-unit-4.doc

Unit Four: Human Capital and Economic DevelopmentI. Passage Analysis, a summary and interpretationParagraphingThemeMain ideas and key pointsKey wordSection IParas. 1-10Human capital, its situation in China, its significance in general and in particular in relation to China Para. I ( 1-2 ): Capital investment in China and its general characteristics 1) The general situation of human capital investment in China is characterized as imbalance, as examined from its proportion in national GDP and in comparison with physical investment.2) It is symptomatic of policy distortion that holds back the economic development in certain regions in China.Para. II (3-6)Human capital and its impact upon economy in general1) Human capital, the skill of population whose roles well account for the differences in productivity and inequality among nations; 2) It is productive by imposing immediate effect on raising the skills of workers. 3) It improves the adaptability and allocative efficiency in society.Para. III (7-10) Significance of human capital to China 1) China is changing and its labor markets and capital markets are changing along with the worlds economy which requires a large number of educated and better skilled people.2) China has its access to newer forms of technology and organizational arrangements, as the world markets opens, which requires increased skilled work force.3) New technology brought into China by its investment in physical capital needs skilled workers to operate and complementary characteristics between capital and skill requires a balanced strategy for their best productivity4) Higher growth rate, greater national wealth and long run social equality demand that China hold a national policy of optimizing over the full portfolio of investment of both human and physical capital and equalize returns and opportunities across regions.Human CapitalImbalanceBenefitHuman capitalProductivityInequalityChangeBalanced StrategyHigh growth rateNational wealthSocial equalityParagraphingThemeMain ideas and key pointsKey wordSection IIParas.11-16 Section IIIParas. 17-21Problems concerning human capital in ChinaIssues to be handled to foster human capital and promote economic growthPara. I (11-14)Underinvestment problems1) There is low level of public support for education2) The existing funds are spent inefficiently3) Fees from charging policy and subsidy operate inadequately4) The rate of return to education appears to be low and benefits are not directly captured by individuals.Regional disparity problems 1) Schooling finances are tied to the level of local wealth in a region.2) Different regions spend different fractions of their GDP on education3) Resources restraints differentially affect access to schooling of individuals, especially in rural areas and in the west.5) Tuition fees become a substantial fraction of household income in both cities and countryside and the fraction doubles in the countryside6) The birth place of the person determines that persons adult skill level.Problems of insufficiency in current policy1) Hukou policy reinforces inequality in the society across people at a point in time and across generation.2) The policy of charging fees becomes quite a burden to families of low-income both in cities and in the countryside.3) The wage policy does not favor those skilled workersPara. II (15-16)The nature of the rate of return 1) Empirically, the rate of return can help us to evaluate the government activity, to screen the bad investment from the good ones and to conduct policy practically;2) The rate of return, serving as a cost-bernfit criterion, helps us to make sound judgment as to whether human investment or physical investment should be favored and in what proportions.The rate of return issue in the Chinese context1) The rate of return to education in China is pretty low, if estimated by relating market wages to the level of schooling. (about 4% against that of 15%-20% in America)2) This evidence justifies that the relatively high ratio of physical capital investment to human capital investment might be appropriate.3) The above conclusion is quite misleading given that the labor markets function differently in China away from truly pricing human capital services and rewarding people for their skills and that wage policy historically guaranteed a low rate of return to skilled labor and there are still many restrictions on wage setting in the labor markets.3) The only conclusion drawn from the analysis is that personal incentives to invest in skills are low.Para. I (17) General remarks on the issues in discussion1) The low private rate of return in China does not truly reflect the value of human capital.2) The low levels of education reduces the productivity of capital3) A more balanced fashion in both human and physical capital will be more efficientPara. II (18-20) Strategy and policy issues concerning human capital and economic growth1) Government subsidy helps promote education and job training but it entails substantial increase in government expenditure and may not be feasible if school enrollments are dramatically increased.2) A free labor market helps reduce governments burden and draw in forces of private incentives to operate which will create investment pools for human capital and pools of finance for physical capital.3) Equalization of rates of returns across regions by means of free capital and labor mobility and a centralized educational finance policy serving to allocate government funds from the center more evenly across the country help promote economic growth.Para. III (21-21) Advantages and strategies of promoting labor market1) Opening labor market policy will produce the right incentives for people to acquire skills and help reduce inequality across people and over generation in the long run.2) Opening labor market policy should be implemented in pace with increased education and equalized return across regions.3) There should be proper movements in regard to labor market policy:- Rewards and access to capital market should be made available to finance education.- Personal incentives should be encouraged to help schools to perform well.-Credit markets for schooling should be developed.- Freedom of mobility should be improved.Under-investmentRegional disparityInsufficiency Rate of returnCost-benefit criterionPolicyEqualizationLabor marketPersonal incentivecredit marketmobility freedomParagraph ngThemeMain ideas and key pointsKey wordSection IVParas.22-24 Conclusive remarks on some main points concerning human capitalPara. I (22-24) Issues of inequality and marvels of human capital1) Open labor markets could lead to greater wage inequality but in the long run, the inequality across generations will be reduced because the population becomes more skilled and opportunities for education and skill investment are spread more widely throughout the country.2) A policy fostering human capital and more open migration would serve to offset the rise in inequality produced by more open wage setting.3) Inequality is not to be feared as it plays an important role in stimulating people to acquire skill.4) Human capital is the asset that ultimately determines the wealth of the country.InequalityOpen marketFree migrationII. Sentence paraphrase1) A policy that equalizing returns across all investment types and across all regions increases economic growth. (Para. 2) Correction: A policy that equalizes returns across all investment types and across all regions increases economic growth. or A policy equalizing returns across all investment types and across all regions increases economic growth.Paraphrase: A policy that guarantees the same rate of returns to all types of investment and in all regions promotes economic development.2) When economists first began to measure the sources of economic growth, what previously had been considered an unexpected residual became identified as human capital. (Para. 3)Paraphrase: When economists first came to analyze various factors contributing to economic growth, those unexplainable factors beyond traditional economic composition but equally valuable to the economic growth were gradually identified as human capital.3) When we think about an appropriate investment strategy in China, and the development of its regions, it is very important to understand that optimizing over the full potfolio of investment-both human and physical capital-promote the highest rate of growth.(Para.10)Paraphrase: When considering an appropriate investment strategy in China, and the development of its regions, we must be very clear that the best use of the full set of capital investment, both human and phys