Physical Capital, Human Capital, and Social Capital: The Changing Roles in China's Economic Growth

Abstract

This paper examines the roles of physical capital, human capital, and social capital in China's economic growth during the reform period 1981-2010. Empirical estimation confirms that physical capital and human capital contribute to the economic growth, probably due to the capital accumulation and the improvement of labor productivity. The impact of social capital turns from being insignificant in the 1980s and the 1990s to be positive in the 2000s, suggesting its rising importance in recent decades. A declining role of physical capital in the economic growth in China from 1990s to 2000s is also found. The findings hold for several additional robustness checks, including focusing on longer term determinants of the economic growth, subregional analysis, and endogeneity. Furthermore, the foreign direct investment inflows and adjustment of economic ownership structure are also important for economic growth in China.