区域经济学regional economic development第五章.ppt

1、LESSON 5,Human Capital is investment in people just as physical capital is investment in machinery, tools, equipment, etc. Human Capital is just as important as physical capital and in terms of regional development, it matters a great deal.,Human capital theory looks at labour as a differentiated in

2、put or factor of production. It sees the possibility of improving the quality of labour through education, on-the-job training, improved health, better nutrition, etc.,Money spent on any of these activities in order to improve the quality of labour should be treated as investment, just as we call sp

3、ending on new machines physical capital investment.,Endogenous growth theory and a lot of other evidence like the experience of the high-performance Asian economies all confirm the importance of a well-trained population and labour force. As with the other factors we have been examining, human capit

4、al investment is not a guarantee of regional development but it is important as one component of development,Education is most often used as a proxy for human capital investment. But it is important to recognize that education in terms of the formal school system may be a very imperfect measure of h

5、uman capital investment.,This being said, if we calculate the rate of return of various levels of education we find high rates of return for all levels of education, with primary education being the highest, secondary education next and higher education third.,The way these rates of return are calcu

6、lated is by looking at the difference in income over an individuals working life caused by education.,So, for example, if we calculate the average earnings of a group of people with no formal education and one with primary education, then we can say that the difference in average earnings is due to

7、the education the second group has received. This represents the benefits of education and if we also know the cost of this education, we can calculate the rate of return.,The rate of return is revenue/cost x 100% when all revenue and cost items are expressed in current dollars.,Generally speaking,

8、studies of the rate of return to education done in this way show all levels of education with private rates of return higher than the opportunity cost of capital. This means that spending money on education yields a higher rate of return than most alternative uses of the money.,Many of these studies

9、 argue that the social rate of return to education is lower than the private rate of return because they assume the benefits are the same but that the costs are lower for individuals because governments subsidize education.,Under these assumptions, we get Social rate of return = increase in lifetime

10、 earnings/total cost of education Private rate of return = increase in lifetime earnings/private share of total cost Where private sharetotal cost,If this is correct, then it means that students (or their parents) should pay more of the costs of education. As long as students can earn a rate of retu

11、rn from education greater than the opportunity cost of capital, then they will still buy education and should pay the full cost.,These studies also argue that more money should be spent on primary education than on secondary education and more on secondary education than on higher education because

12、this reflects relative rates of return.,It is certainly true that there are many examples of high returns to primary education. A World Bank study, for example, shows the proportion of growth in high performance Asian economies predicted by enrolments in primary education. These numbers are all abov

13、e 50% and some are above 85%.,We also have to remember that education is a cumulative process. You have to have primary education before you can go on to secondary education and you need to complete secondary school before you can go on to tertiary education. So the process must start with primary e

14、ducation.,But this still leaves open the question of who pays. To answer this, we have to introduce the concept of externalities and imperfect markets.,Externalities are benefits or costs received by or imposed on parties other than the direct participants in an economic transaction. In the case of

15、education, we can argue that there are significant positive externalities, i.e., significant external benefits, from more education.,These externalities include things like new knowledge creation, more efficient workers, more worker cooperation producing productivity gains, etc. This means that it c

16、ould be justified for government to pay for some parts of education because private persons may buy too little and these externalities will then be less than they should be.,But we still need to know whether the private return is greater than the opportunity cost of capital and whether the right amo

17、unt of education will be bought by private individuals.,We can show that some subsidies may be required even under relatively perfect market conditions to get the optimal amount of education. But we also have to take into account that markets are not perfect.,Education can be regarded as a merit goo

18、d where a merit good is one that society will underconsume or underinvest in due to ignorance uncertainty or irrationality,In this case, more subsidies may be required to achieve the optimal amount of education.,The three readings for this section of the course all deal with the case of China. One o

19、f these papers looks at human resource investment specifically after first observing that regional inequality in China has soared in the last 20 years.,The gap between the coastal region and other regions has increased significantly since 1991. By 2003, the ratio of real per-capita GDP between the w

20、ealthiest province and the poorest was 8.65. The northeast region which was the leading region in real per-capita GDP in 1978, by 2003 was 30% behind the coastal region. The coasts advantage over the interior region and the far west was 2.4 in terms of the real per-capita GDP ratio.,The authors find

21、 that the returns to education above the elementary level by region are DirectIndirect Coastal0.1230.280 Northeast0.0840.277 Far West0.1850.232 Interior0.1860.282 National0.1440.261,These are very significant numbers. The authors argue that human capital affects output in three ways: Educated labour

22、 directly contributes to production The proportion of workers with senior high school or above directly affects TFP growth via its effect on innovation. There is an indirect spillover effect of human capital on TFP growth.,The overall conclusion of the paper is that human capital investment in less-

23、developed areas can enhance economic efficiency and reduce inequality. They argue that the Grand Western Development Project which involves enhancing infrastructure in 11 western provinces should be doubled to provide equal funding to human capital investment and that this will do more to reduce ine

24、quality than infrastructure alone.,The second paper looks at innovation activities in different provinces in China and tests whether education differences are able to explain differences in innovation.,Endogenous growth theory says that human capital is one of the factors that drives growth and that

25、 it does so through innovation activities. Thus regions that are richer typically have higher levels of educational attainment and are able to use this to further innovation activity and grow even faster as a result.,Based on the statistical analysis in this paper, the main conclusions are: Innovati

26、on activities significantly increased across China from 1997-2006. The spatial spillovers of innovation activities also rose a neighboring province effect. The % of college-educated workers is a significant predictor of regional innovation intensity. Over time the impact of education on innovation h

27、as decreased.,The third paper in this section looks at some further aspects of human capital in a regional context.,The paper by Fu and Gabriel is concerned with internal labour migration in China and how this has affected regional disparities. More specifically, they examine whether the concentrati

28、on of skilled labour in major urban centers creates spillover benefits for skilled labour that cause skilled labour to become even more concentrated in regions which are already employing more skilled labour and in the process make regional disparities worse. But they also look at how this impacts o

29、n low-skill workers.,The study finds that the motivation for migration differs between low-skill and high-skill workers. The former are influenced by the amenities at their destination as well as human capital concentration and other aspects of human capital agglomeration. Unskilled workers, by cont

30、rast, are not influenced by these things, nor is there much interaction between low and high skill workers.,More interaction between the two groups would benefit the unskilled workers and lead to them acquiring more skills and moving up in the labour market. But they do not because they do not permanently relocate and acquire no inter