How Japanese experience and Human Capital theory provides a guidance for China’s educational development to promote economic growth ?

Presented by Tianze Shi, Yuhang Liu, Tianyu Li, Jiayi Zheng

Human Capital

•One of the most important factor in endogenous growth model to facilitate economic growth

•Human Capital: Quality of workforce(Knowledge, skill, talent, value) through Education

Human Capital (con’t)

•Productivity growth is more rapid where countries have higher levels of average schooling

•At an early stage of economic development, the level of education plays an important role in technological catch-up( Japan Meiji period)

Endogenous Growth Model

•Economic growth is generated from within a system as a direct result of internal processes.

•It holds that investment in human capital, innovation, and knowledge are significant contributors to economic growth.

•Development of new form of technology innovation, efficient and effective means of production.

Endogenous Growth Model (con’t)

•Contrasts with neoclassical economic model (external factors: Saving rate, Technological progression)

•Assume constant MPK if there is an increase in Human Capital

Japan’s experience of economic growth due to education Meiji period: 1. Thousands of students were sent to U.S.

and Euro. 2. Hire large numbers of westerns to teach

modern science, math, technology, etc.3. Revised Education System Ordinance4. Change in in the ideological context of education.

Japan’s experience of economic growth due to education •Economic development in Meiji Period:•1.  Industrializing•2. Rapid economic growth•3. Modernization development

The economic development of Japan guides: investment in education Human capital increases Economic growth

Current Situation of China

•In order to facilitate long-term economic growth, China needs to enhance human capital

•Take Pearl River Area and Yangtze Area•as examples.

Pearl River Area vs. Yangtze Area

Pearl River Area Yangtze Area

Low Human Capital High Human Capital

Assembly Industry High Tech. Industry

Less educated workers High tech. And educated workers

Pearl River Area vs. Yangtze Area

Pearl River Area Yangtze Area

Less colleges and universities5.6%

Lots of colleges and universities13.1%

Support from technical institutions

High dependency on export 92% of GDP in 2007

Self-developed technology to support the economy

Pearl River Area vs. Yangtze Area• Influences of 2008 Financial Crisis on Pearl River Area:• -U.S demand decreased - Growth rate: 4% less than that in 2007, only 2.4% for

Yangtze Area- Bankruptcy of small scale companies, unemployment

• Implications:• Yangtze Area with higher human capital can achieve a

sustained economic growth better than Pearl River Area.

Adjusted savings: education expenditure (current US$):Education expenditure refers to the current operating expenditures in education, including wages and salaries and excluding capital investments in buildings and equipment

Adjusted savings: education expenditure (% of GNI)Education expenditure refers to the current operating expenditures in education, including wages and salaries and excluding capital investments in buildings and equipment.

Education expenditure• Tertiary school enrolment gross rate:

China: 24% Japan: 60% (from world bank)Even though Education expenditure is increasing, the expenditure in some poor areas( Gansu, Ningxia) is not increasing significantly.• Teachers wage: China much lower than Japan

Also high-performing teacher gets more reward in Japan• Japanese tertiary education institutions are more

attractive than Chinese• Chinese talents loss higher than Japanese

Recommendation:

•Expand expenditure on education: i) Perfect educational software and hardware facilities. Attract more overseas students, reduce domestic talents leave. ii) Equal distribution of expenditure in different areas and fields. Narrow rural-urban education gap, including quality of teaching, teaching environment, teachers wages, etc.

Education Inequalities

•Gansu is one of China’s north-west province, barren and historical reasons make it be a poor area since ancient time

•Shanghai is China’s biggest economic development city, also is one of Chinese 4 municipalities.

Education Inequalities(2011) • Total population:• Shanghai: 23.5 Million• Gansu: 25.8 Million ( Close )

• Education expenditure• Shanghai: 7,106,255 • Gansu : 3,608,174

( Half )

• From the data of 2011 we can find, these two areas’ population is close, even Gansu is more than Shanghai, but education expenditure of Shanghai is almost twice than Gansu.

Student faculty ratio of high school

• Shanghai : 9.7• Gansu : 17.03• Average of China: 15.7

• Low wage for teachers in Gansu, more excellent teacher are running off.

• Faculty resource unbalance shows the soft power unbalance.

0

246

8101214

1618

Facul ty student rati on

ShanggaiGansuAverage

Issues--- influence human capital

•1. Education reward •2. Salaries of teachers•3. The model of higher

education( University)•4. Retain human capital(Attract oversea

students to come back, retain skilled labor force)

Education Reward(Fellowship)

•Importance of Education Reward: 1. Motivate the students to study hard, 2. Offer opportunities to students who

are not able to continue further study. 3. Attract foreign students to study in

China( attract talent)

Education Reward• In Korea, the life of a student who enters the

Seoul National University(best university in Korea), is guaranteed.

• However, in China, the situation is quite different.(An graduate from Beijing University became a meatman)

• This kind of “reward” helps to enhance the human capital better in Korea than in China.

Application in Education Reward

•Education reward contributes to literacy which helps to enhance Human capital

•China needs to increase public spending on education reward.

•Level up the reward of creativity to promote innovation.

Monthly Average Salaries of Public Higher Education Faculty, Using U.S. PPP Dollars

China Japan United State Canada0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

China; Entry; 259

Japan; Entry; 2897

United State; Entry; 4950

Canada; Entry; 5733

China; Average; 720

Japan; Average; 3473

United State; Average; 6054

Canada; Average; 7196

China; Top; 1107

Japan; Top; 4604

United State; Top; 7358

Canada; Top; 9485

Entry

Average

Top

Salaries of public higher education faculty1. Salaries of public higher education

faculty in China is the lowest(nearly 1/5 of Japan’s, 1/10 of Canada’s)

2. Education faculty is a very important factor to influence human capital:

low salaries→high skilled people not prefer to teach →Teachers with low skill→Students are not well educated →Weaken human capital

Salaries of public higher education faculty•Recommendation:•1. Government take actions(raise salaries,

respect for teachers) to improve status of teachers in order to attract more skilled people to be teachers.

•2. Increase public spending on teacher training to enhance the quality of teacher

Universities in Japan• Private universities depend highly on tuitions.• Seldom dismiss students who have poor

performance.• Class size is increasing( education quality

decrease)• Student evaluation is mainly based on final exams.• University students: 81% spend less than 3 hours

studying in extracurricular time( 32% never study after class)

• 4-years university study often finishes in 3 years: Students are busy attending job search activities.

Implications to China• Model of Japanese Universities is not good to

develop human capital.• The knowledge and skill of students is not well

trained.• The decreasing applications of patents in Japan

might be a result of the model of Japanese universities.

0100000200000300000400000500000600000

U.S.Japan

Implications to China• The model of Chinese University is similar to that of

Japanese University:• A large number of university students spend few hours

studying after class( Especially in some non-famous universities)

• Students with very small effort can also get their degree in most universities.

• Human capital is not really enhanced in Chinese Universities.

• Need to do some changes: Raise standard of graduation, add class contribution into student evaluation, assign more extracurricular work to students.

Current situation of oversea study

•AS the increased number•1.High capital outflow•Because of the global downturn , many

developed countries treat international students as the important educational investment source.

•Almost, the scale of Chinese overseas students consumption market is 40 billion US dollar, most of these are cash, China also has become the largest overseas students exporting country.

Current situation of oversea study•AS the increased number

•2.High brain drain rate•Only a quarter amount of people choose

go back to China.•Foster at Home, harvest out home, a

Chinese education official said.

Skilled Labor Force

Job-hopping-

•technical personnel

•management personnel

•Innovative talents

Expatriate

Environment

Others

Financial Remuneration

Development Opportunity

Reasons of not coming back

Precedent

•Japanese main experiences： 1.Increase the wage level, especially for

the top talents. 2.Corporation makes contracts with

talents.

Precedent

•Korea main experiences: Allow to dual nationality in 2011.(No obvious effect, but have a nice

expectation )

Suggested Solution

1.Policy:•Performance reform, not by seniority•Promote social equality and justice•Support the corporation, create work

opportunities•Contract with high cost of training•Maybe try dual nationality

Suggested Solution

2.Financial:

•Increase the wage level

•Subsidy

•Money award

Suggested Solution

3.Culture and environment.

•Enterprise cultural construction

•Promote the environment development and life quality.

Brief Conclusion• 1.Economic growth and Japanese experiences

show that human capital plays an important role in economic growth

• 2.China needs to do some reformation to enhance human capital to promote economic growth:

• Enhance education expenditure, increase education reward, raise the social status of teachers, implement university reformation, attract students who study in abroad to come back, retain skilled labor force.

Questions?

Thank you !

Reference• Japan paten office:

http://www.jpo.go.jp/cgi/linke.cgi?url=/shiryou_e/toushin_e/kenkyukai_e/annual_report2013.htm

• USPTO.GOV: http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htmGDP• Education expenditure:

http://www.indexmundi.com/facts/indicators/NY.ADJ.AEDU.CD/compare?country=cn#country=cn:jp

• Salaries: http://www.insidehighered.com/news/2012/03/22/new-study-analyzes-how-faculty-pay-compares-worldwide#sthash.xyxaLZbH.dpbs

• Pearl River Area vs. Yangtze Area: http://wenku.baidu.com/link?url=kiQ9_OL5zlZyVaFtSvIwo8WLkGUwgEGFen7Plx791CCU8BYZCKYQ_9Qjeblob8gyoIEv-OEEUujc7MqjZ3V8L2MT_s-bgbKPDsv0xuK3pVW

• http://business.sohu.com/20090226/n262470596.shtml• Education Inequalities(National data): http

://data.stats.gov.cn/workspace/index;jsessionid=4194D945D76EBDDA4417B0E5205714E7?m=hgnd

• Abroad study: http://data.stats.gov.cn/workspace/index;jsessionid=4194D945D76EBDDA4417B0E5205714E7?m=hgnd