Comparative Advantage, Human Capital And Industrial Structure Upgrade

International and domestic academics have already gained achievements based on large aggregation of studies on the problem about what strategies should a country take to promote the upgrading of industrial structure. There are three basic types of strategies for promoting the upgrading of industrial structure so far, namely in terms of: comparative advantage strategy, forging ahead strategy and independent innovation strategy. Experience has shown that the implementation of forging ahead strategy is very harmful for economic development and upgrading industries. Thus it is not adopted in practice. Comparative-advantage strategy and independent innovation strategy were derived from the theory of comparative advantage and the theory of human capital separately from a theoretical perspective. Although these two theories were favored and admired to some extent for a large sphere of influence in theory and the validity of application in practice, there are still many issues worth exploring. First of all, these two theories are two separately independent parameters on the choice of variables which influence the upgrading of industrial structure. That means, either we just analyze the relationship between comparative advantage and the upgrading of industrial structure or just analyze the relationship between human capital and the upgrading of industrial structure. We ignore the synergy effects of these two may have impact on the upgrading of industrial structure. Besides, most scholars believe that comparative advantage is just derived from the traditional resource endowments because their understanding of the formation mechanism and the meaning of the comparative advantage is still confined to the static analysis methods and an understanding in narrow sense. Thirdly, some scholars argue that industries with comparative advantage will step in comparative advantage trap and deny this strategy. Therefore, it is of vital important to analyze the relationship and the connotative meaning between the comparative advantages and the comparative advantage trap but also in recognizing and understanding the effect of the comparative advantage. Additionally, most studies about exploring the relationship between human capital, economic development and industrial structure focused on the impact of human capital on economic growth. While it will provide a research direction from a new perspective based on the relationship between human capital and economic catch-up. The impact of human capital on the upgrading of industrial structure extends beyond the total level of human capital, so it more promising from the perspective of human capital structure. Last but also important, any theoretical explanation of economic phenomena have limitations is the scientific approach. Therefore, the combination of the two theory will clear up the confusions of industrial upgrading to a greater extent because there are still some deficiencies to explain the the upgrading of industrial structure by using the comparative advantage theory or the human capital theory separately. On the basis of the above statements, doing studies of the relationship between the comparative advantage, human capital and the upgrading of industrial structure of China can not only theoretically to enrich the content of the upgrading of industrial structure, but also can guide the implementation of industrial upgrading in practice. Furthermore, it can provide certain directive directive significance for the industry policy adjustment.The main content of this paper is as follows:The first part covers introduction and summary of research which is focused on the background and significance of this article, research ideas, content and research methods, as well as the main innovation.Generation mechanism and the connotative meaning of the comparative advantages is probed from diverse perspectives into the second part based on the remark of the content of traditional comparative advantage. Modern comparative advantage derives from the comparative advantage of resource endowment, specialization, economies of scale as well as the external economies. The comparative advantage of natural resources not only includes the use of traditional resources, but also includes the use of the comparative advantages produced by senior resources like knowledge, technology and human capital. The comparative advantages could be exogenous and endogenous, static and dynamic which can be transformed into each other.The third part theoretically and empirically analyzes the fundamental role of comparative advantage in the upgrading of industrial structure. First of all, discussing the intrinsic logic relationship existed between the choice of industrial structure and comparative advantage on the basis of analyzing the defect of comparative advantage trap. Through comparing the existing industrial upgrading path selection strategies, the article set forth that the comparative advantage strategy has a foundation role in the upgrading of industrial structure. Secondly, this article empirically tested that if only the government follows the law of comparative advantage, the industrial structure could upgrade effectively and continuously through the analysis of industrial development stages in China, Japan, South Korea and the United States and through the analysis of several cases about auto industry development in China, Japan, US and India. Furthermore, it shows that the adjustment and upgrading of industrial structure in our country since China’s reform and opening up has benefited a lot from following the law of comparative advantage by using empirical indicators of comparative advantage to test the changes in China’s major industries and the situation of comparative advantage for each industry.Part IV analyzes the weakening effect which arising in the process of development of the law of comparative advantage. But this has a naturally difference from the comparative advantage trap theory and analyzes the manifestation, Intension and the reason of the weakening effect of comparative advantage from a theory-based perspective.The fifth part mainly analyzes the key role of human capital for economic development and industrial upgrading. Firstly, it expounded the inevitability about the industrial upgrading will shift from comparative advantage to human capital on the logic of economic theory. Then, through summarizing the evolution, characteristics and the connotative meaning of the modern human capital theory and using cases analysis method and empirical analysis method to analyze the gap between human capital’s impact on economic development and human capital’s impact on industrial structure of the sample countries, especially interpreting by some economic examples like the United Kingdom caught up Netherlands, the United States caught up England, Japan caught up US and South Korea caught up Western Europe, the article draws inspiration from the human capital in economic development and catch-up process should have unique characteristics. Finally, summarized and explained the relationship between human capital and the upgrading of industrial structure then expound and conclude several human capital models to promote industrial upgrading.Part VI analyzes the barriers to investment in human capital weaken the driving force for economic growth and industrial upgrading. First of all, the article discusses the investment obstacles in human capital to individuals and businesses and explains the system defects which hinder the capital development, educations about investment, human capital allocation and human capital property rights insufficiency and ambiguous. Secondly, through case studies and literature review the article discusses the departure phenomenon between human capital and economic growth and explains the above phenomenon by the law of diminishing marginal returns and the differentiation of the quality of human capital these two aspects.Part VII, I analyze the interaction mechanism between comparative advantage and human capital in the process of the upgrading of industries specifically to the inadequate existing in promoting industrial by comparative advantage and human capital. The results show that if only we combine the human capital theory and comparative advantage effectively which results in a " synergistic effect " could lead to a complementation for advantages and disadvantages, so as to actuate industrial upgrading effectively.Part VIII is mainly about research conclusion and research prospects. In general, comparative advantage is the basis of industrial upgrading. China’s economic development and the upgrading of industrial structure benefited from following the comparative advantage. However, with the development and evolution of comparative advantage the weakening effect will increase gradually. Human capital is a key aspect to industrial upgrading. Despite increasing human capital level in China, the quality and structure remains a low level. The development of human capital has some obstacles which could limit the validated work. Only by combining the comparative advantages and human capital effectively could we create and promote the synergistic effect of industrial upgrading.