The Impact of Human Capital and Social Capital on Economic Growth in China
In recent years the transformation of the economy of China, a country with almost twenty percent of the world’s population, has been the most important economic development of late twentieth and early twenty first centuries. The transformation of the Chinese economic system in the wake of Deng Xiaoping and China’s expansion into global markets for manufactured goods such as Asia, EU and USA have been the important preconditions for this growth. Within China, current studies show that some provinces with natural advantages such as better access to markets and better access to investment capital, and some provinces with human resources advantages such as a larger share of workers at the higher education level and higher level of social capital have outperformed provinces without those advantages in economic growth. This dissertation makes several contributions to the existing literatures. First, different from existing studies exploring the effect of the average level of human capital on economic growth, this dissertation examines the effect of the share of workers whose highest level reached is college, the share of workers whose highest level reached is lower than higher education and entrepreneurial human capital on GDP growth. Second, this dissertation initially uses the commercial group as a proxy for social capital. Focusing on the provinces of China, this dissertation uses a cross-sectional data set from 2005 to 2017 and finds that, the share of workers at the higher education level has a significantly positive effect on GDP growth in China; the share of workers whose highest level reached is lower than higher education has a lower effect on GDP growth in China than the share of workers whose highest level reached is higher education. We use the proportion of population who are the CEOs of private enterprises or self-employed individuals to proxy entrepreneurial human capital. The proportion of the population who are CEOs of private enterprises or self-employed individuals, when standardized, has an insignificant negative effect on GDP growth in China. The standardized variable is obtained by subtracting the mean from the variable and then dividing it by the standard deviation. However, this result may be due to problems with the proxy. For example, many individuals start a business out of necessity in China. The commercial group has significant positive effects on regional innovation activities. Using a dummy variable indicating whether (1) or not (0) the province has a commercial group originating from the Ming or Qing dynasty is used as a proxy for the quality of social capital. Zhejiang has two commercial groups ranked in the top 10 in China. Zhejiang’s more entrepreneurial culture and its increasing proportion of population who are CEOs of private enterprises or self-employed individuals (the combined effect) contribute to its economic growth. Commercial groups are informal groups of businessmen from a region who support each other and share information with the purpose of generating income throughout history. The commercial groups originating from the Ming or Qing dynasty are from Fujian, Guangdong, Shaanxi, Shandong, Zhejiang, Shanxi, Anhui, Jiangsu, and Jiangxi respectively (Ma and Wu, 2022). They are famous because of their high reputation. Commercial groups build social capital through the channel of informal entrepreneurial education and information sharing. Within a top commercial group, new businessmen can talk with the successful entrepreneurs. They are imbued with an entrepreneurial spirit and learn entrepreneurial skills from successful businessmen.
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