Essay Sample on Importance of Human Capital for Economic Development

Paper Type:  Essay
Pages:  3
Wordcount:  567 Words
Date:  2022-04-12


"Human resources are like natural resources; they're often buried deep. You have to go looking for them, they're not just lying around on the surface. You have to create the circumstances where they show themselves."

Human capital is necessary for a country's growth and prosperity. Governments and this case Chinese government has a critical role in ensuring that the education and training offered to workers lead to skill formation, improved effectiveness as well as enhanced productivity (Whalley, & Zhao, 2013). Educational policies, employee training, and health programs are essential elements of human capital development. The success of human capital development is determined by the cost benefit analysis, whereby benefits must surpass costs. Investment in human capital leads to technological externalities commonly known as knowledge spill.

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Entrepreneurs are critical drivers of economic growth. The Chinese government should work to remove unnecessary hindrances to entrepreneur successes, for example, bureaucracy, bribery, rent-seeking or corruption. Productivity can be increased through government support on scientific and technical prowess, for example, what the Chinese government is doing with artificial intelligence (AI) whereby they plan to be the leading players in the world.

Several public policies are developed to generate and enhance technological prowess. One way of encouraging innovations is through the enactment of well-structured intellectual property laws. The role of the government is promoting industries with rapid technological progress also known as knowledge-intensive industries. Government regulations regarding environmental protection, workplace safety, and consumer product safety can be costly and able to cause economic growth retardation. Outdated and wasteful rules should be removed from within government policies and replaced with efficient and flexible ones. The Chinese government can among other things reduce monopoly, and introduce an analysis on government expenditure.

Industrial policies are critical instruments of economic development promotion and have been used in the past and currently. Success or failures of such policies are analyzed through structural economic perspectives. Industrial strategies will see the Chinese government use taxes, subsidies, and regulations to influence specific national development patterns. It is essential for the government to know that high tech industries are critical to maintaining national leadership in technology (Borras, & Edquist, 2013). However such sectors are not supported by free markets regarding resources allocation. Such areas are faced with borrowing constraints making it difficult to finance projects, for example, R&D on supercomputer requires extended periods of high expenses with likely low cash flows. Social benefits in such innovations exceed private benefits; therefore the government must come out to give subsidies as strong incentives to venture into innovations. The government should be careful as many industrial policies fail because of government incompetency in choosing winning technologies. Politicians might use their influence to advocate for wrong industries while the right ones go unattended. To avoid this mistake and in the end benefit from the policies, the government can introduce tax breaks for all R&D without having to target some.


Borras, S., & Edquist, C. (2013). The choice of innovation policy instruments. Technological forecasting and social change, 80(8), 1513-1522.

Churchill, W. S. (2010). The Gathering Storm: The Second World War (Vol. 1). RosettaBooks.

Robinson, K. (2009). The element: How finding your passion changes everything. Penguin.

Whalley, J., & Zhao, X. (2013). The contribution of human capital to China's economic growth. China Economic Policy Review, 2(01), 1350001.

Yang, D. T., Zhang, J., & Zhou, S. (2012). Why are saving rates so high in China?. In Capitalizing China (pp. 249-278). University of Chicago Press.

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