Human Capital Flows And Regional Growth Imbalances - China, For Example

Why does an economy grow? Can the ongoing trend of growth be sustainable? Can all parts of the world grow together? For centuries, many economists have explored hard in this area and proposed their own opinions for explanation. And these have made great efforts in current research.In explaining the source of economic growth, from the division of labor, the exploitation of nature resource, more input in physical capital, accumulation of human capital, to the application of technology progress, etc., we've got a deep understanding and a wide foresight. And among all these factors, the human capital has played a crucial role hi the development of growth theory. From the early neoclassical growth model which emphasized in capital, labor, and exogenous technology progress, to modern growth model that emphasized in endogenous technology progress, through learning by doing, spillover in human capital investment, etc., we have seen the importance of human factor, and the concept of human capital has become an essential part in new growth model.But in the explanation of neoclassical model, there exists a controversial conclusion: the convergence. Because of diminishing marginal return of capital input, and the difference of capital stock between developed region and developing region, the growth rate in developing region will be faster than in developed region. Yet the empirical analysis did not coincide with the theory. In most circumstances there seemed to be a disparity between these regions: the rich became richer and the poor became poorer. The convergence, however, has emerged in each region respectively and been called club convergence.This paper, from the point of human capital, studied the unbalanced regional growth theoretically and analyzed the interaction of these influences. Suppose that the economy begins with the ratio of physical capital stock and human capital stock in developed region lower than in developing region. Through the Uzawa-Lucasmechanism, this would result in the difference of growth rate and the disparity of income further. In turn, the high income in developed region lures human capital flow from developing region, and broadens the income gap too. It is this interaction that makes the regional growth imbalance. If the economy operates fully under the market principle, it obviously turns out a wider income gap between the developed and the developing regions.In the later part of this paper, we analyzed the empirical case of China. From the different growth rate between east and west, and the interregional movement of human capital, we've got an empirical conclusion of China's growth fact coincided with the prediction of the theory previously. Thus, it's very necessary for Chinese government to carry out and persist in the strategy of going west, leading to the flow of resource, technology, especially human capital from east to west, and the convergence of whole economy.