Managing the Middle-Income Transition
Show Less

Managing the Middle-Income Transition

Challenges Facing the People’s Republic of China

Edited by Juhzon Zhuang, Paul Vandenberg and Yiping Huang

The growth model of the People’s Republic of China has been based on high investments, exports, low-cost advantage, and government interventions. This model has successfully transformed the country from a low-income to an upper middle-income economy. However, the model has generated contradictions that could undermine future growth. Making the transition to high income requires greater reliance on efficiency and productivity improvement, innovation, and market competition. This book examines the challenges faced by the People’s Republic of China in sustaining robust growth, and policy options for making a successful transition to a high-income economy to avoid getting caught in the middle-income trap.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 17: Education and human capital development

Meiyan Wang


Strengthening education and developing human capital are essential for the People’s Republic of China (PRC) to avoid the middle-income trap. The reasons for this are fourfold. First, education and human capital development are among the most effective ways to achieve rapid economic development and improved labor productivity. In Cai and Wang’s (1999) decomposition of the PRC’s growth from 1978 to 1998 into capital, labor, human capital, and labor transfer, human capital contributed 24 percent to annual gross domestic product (GDP) growth. In addition, Cai and Qu (2010) find that marginal labor productivity in manufacturing rises by 17 percent for each year of additional schooling. Second, nearly all high-income economies attached great importance to education and human capital development when they made the transition from the middle-income stage. Two important models are Japan and the Republic of Korea, both well known for increasing education investment and instituting reforms to improve access and raise the quality of education during their economic transformations. For example, the Republic of Korea increased education expenditure substantially from the 1970s and encouraged a major increase in private investment in education. Third, returns to education have increased rapidly in the PRC (Lai 1999; Li et al. 1999). Gustafsson and Li (2000) find a substantial rise in the returns for a four-year college education compared with a high school education for male workers, from 9 percent in 1988 to 16 percent in 1995.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.