Human Capital , Industrial Structure, and Economic Growth: A Dynamic Panel Data Analysis

Abstract

Human capital is one of the main determinants of economic growth and also the key factor for changes in the industrial structure. Given the large literature on role of human capital in recent growth in China, the impact of the interaction between human capital and the transformation of Chinese industrial structure received little attention. In this study, we assess the direct effect of human capital on economic growth, and in addition, its indirect effect including the interaction of human capital with the industrial structure in China. Based on dynamic panel data estimations with Chinese data at the state level, we find that both human capital and industrial structure are important factors for China’s GDP per capita. What’s more, the interaction between human capital and the share of high tech/high knowledge industries affects the GDP per capita positively and significantly.