The Inheritance of Marketization Level and Regional Human Capital Accumulation: Evidence from China

The differences in human capital stock among regions in China have been widening since the mid1990s, and regional marketization level is a possible determinant of human capital accumulation. Combining a nationwide survey data set at the individual level with more than 40,000 observations and an index of marketization for each province, we find a positive relation between marketization level and individuals' years of schooling. Moreover, regional marketization levels, in the long run, using instrumental variables estimation can explain about 53% of the differences in average years of schooling among provinces. The findings suggest that a better market environment encourages human capital accumulation, which is an important condition for regional economic prosperity.

Automated summary

The level of marketization in regions is positively related to individuals' years of schooling, and in the long run, it can explain over half of the differences in average years of schooling among provinces. This suggests a better market environment encourages human capital accumulation, which is essential for regional economic prosperity.