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The threshold effect of high‐level human capital investment on China's urban‐rural income gap

The threshold effect of high‐level human capital investment on China's urban‐rural income gap Purpose – The purpose of this paper is to shed light on the effect of high‐level human capital investment, using tertiary education as the proxy, on the urban‐rural income gap in China. Design/methodology/approach – Using a panel dataset covering 28 provinces of China over the period from 1988 to 2007, this paper employs Hansen's method and two‐step GMM‐SYS estimator to estimate the threshold regression model and the dynamic fixed‐effect panel model, respectively. Findings – The urban‐rural income gap is found to be related to high‐level human capital investment in an inverted U‐shaped pattern with respect to economic development level. The estimated threshold turning point is around 20,000 RMB GDP per capita. This estimate is sufficiently robust to model specifications and variants of the dependent variable. Social implications – The authors forecast that high‐level human capital investment could play a role in bridging the urban‐rural income gap at the national level by 2014, when China's GDP per capita assumes an annual growth rate of 7.5 percent. Originality/value – This, it is believed, is the first research to find an inverted U‐shaped pattern for high‐level human capital investment and urban‐rural income gap nexus in China. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Agricultural Economic Review Emerald Publishing

The threshold effect of high‐level human capital investment on China's urban‐rural income gap

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1756-137X
DOI
10.1108/17561371111165752
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to shed light on the effect of high‐level human capital investment, using tertiary education as the proxy, on the urban‐rural income gap in China. Design/methodology/approach – Using a panel dataset covering 28 provinces of China over the period from 1988 to 2007, this paper employs Hansen's method and two‐step GMM‐SYS estimator to estimate the threshold regression model and the dynamic fixed‐effect panel model, respectively. Findings – The urban‐rural income gap is found to be related to high‐level human capital investment in an inverted U‐shaped pattern with respect to economic development level. The estimated threshold turning point is around 20,000 RMB GDP per capita. This estimate is sufficiently robust to model specifications and variants of the dependent variable. Social implications – The authors forecast that high‐level human capital investment could play a role in bridging the urban‐rural income gap at the national level by 2014, when China's GDP per capita assumes an annual growth rate of 7.5 percent. Originality/value – This, it is believed, is the first research to find an inverted U‐shaped pattern for high‐level human capital investment and urban‐rural income gap nexus in China.

Journal

China Agricultural Economic ReviewEmerald Publishing

Published: Sep 6, 2011

Keywords: China; National economy; Economic development; Human capital investment; Urban‐rural income gap; Threshold; Inverted U‐shape

References