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Quantifying biased technical progress in China: Heterogeneous human capital and labor force dynamics.
Xiuli Cui1, Ehsan Elahi1, Bo Xu2
1School of Economics, Shandong University of Technology, Zibo, 255049, China.
Heterogeneity in China's labor force and human capital quantitatively impacts economic growth. Accounting for these factors increases the elasticity of substitution and decreases biased technological progress, boosting productivity.
Area of Science:
- Economics
- Econometrics
- Technological Progress
Background:
- China's economic growth is influenced by technological progress.
- Understanding factor substitution and technical bias is crucial for policy.
- Previous studies often assumed homogeneous labor and human capital.
Purpose of the Study:
- Estimate biased technical progress in China with heterogeneous human capital and labor.
- Quantify the impact of this heterogeneity on substitution elasticity and technical bias.
- Compare growth rates of human capital-augmenting vs. labor-augmenting technical progress.
Main Methods:
- Employed constrained Seemingly Unrelated Regression (SUR).
- Utilized provincial-level panel data from 1985 to 2021.
- Compared estimations with and without accounting for heterogeneity.
Main Results:
- Capital-labor (human capital) substitution elasticity is 0.7-0.8, indicating complementarity.
- Heterogeneity quantitatively increases substitution elasticity and decreases biased technological progress.
- Human capital-augmenting technical progress growth rate is significantly lower than labor-augmenting.
Conclusions:
- Heterogeneity in human capital and labor force significantly impacts economic growth estimations.
- Policy should prioritize human capital investment and technological upgrades.
- Rebalancing technical progress is key to boosting China's productivity growth.
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