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Human Capital Development in the People's Republic of China and India

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Human Capital Development in the People's Republic of China and India Human Capital Development in the People’s Republic of China and India Achievements, Prospects, and Policy Challenges This report was prepared with the primary objective of drawing insights on how Asian economic giants India and the People’s Republic of China leveraged education and skills development to advance economic growth. The analysis presented similarities and differences in human capital development strategies and their outcomes that helped define development pathways between the two countries. It also outlined the prospects for human capital development in the sustainability of the two countries’ economic growth. The report was completed in 2014 under the Development Partnership Program for South Asia: Innovative Strategies for Accelerated Human Resource Development in South Asia (TA-6337 REG). About the Asian Development Bank ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, it remains home to the majority of the world’s poor. ADB is committed to reducing poverty through inclusive economic growth, environmentally sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. HUMAN CAPITAL DEVELOPMENT IN THE PEOPLE’S REPUBLIC OF CHINA AND INDIA: ACHIEVEMENTS, PROSPECTS, AND POLICY CHALLENGES ASIAN DEVELOPMENT BANK 6 ADB Avenue, Mandaluyong City 1550 Metro Manila. Philippines ASIAN DEVELOPMENT BANK www.adb.org ASIAN DEVELOPMENT BANK Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2015 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 632 4444; Fax +63 2 636 2444 www.adb.org; openaccess.adb.org Some rights reserved. Published in 2015. Printed in the Philippines. ISBN 978-92-9257-161-0 (Print), 978-92-9257-162-7 (e-ISBN) Publication Stock No. RPT157742 Cataloging-In-Publication Data Asian Development Bank. Human capital development in the People’s Republic of China and India: Achievements, prospects, and policy challenges Mandaluyong City, Philippines: Asian Development Bank, 2015. 1. Human capital development. 2. People’s Republic of China. 3. India. I. Asian Development Bank. The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of said license as well as the Terms of Use of the ADB Open Access Repository at openaccess.adb.org/termsofuse This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material. Attribution—In acknowledging ADB as the source, please be sure to include all of the following information: Author. Year of publication. Title of the material. © Asian Development Bank [and/or Publisher]. https://openaccess.adb.org. Available under a CC BY 3.0 IGO license. Translations—Any translations you create should carry the following disclaimer: Originally published by the Asian Development Bank in English under the title [title] © [Year of publication] Asian Development Bank. All rights reserved. The quality of this translation and its coherence with the original text is the sole responsibility of the [translator]. The English original of this work is the only official version. Adaptations—Any adaptations you create should carry the following disclaimer: This is an adaptation of an original Work © Asian Development Bank [Year]. The views expressed here are those of the authors and do not necessarily reflect the views and policies of ADB or its Board of Governors or the governments they represent. ADB does not endorse this work or guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. Please contact [email protected] or [email protected] if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo. Note: In this publication, “$” refers to US dollars. ADB recognizes “China” as the People’s Republic of China. CONTENTS Foreword vii Acknowledgments ix Abbreviations x Executive Summary xi I. Overview 1 A. Objective and Scope 1 B. Organization of the Report 2 C. Background and Motivation 3 II. Human Capital Development, Achievements, and Gaps 10 A. Literacy, School Enrollments, and Educational Attainment 10 B. Disparities in Educational Achievements and Opportunities 14 C. Quality of Education 19 D. Employability and Skills Development 28 E. Challenges to Quality Employment and Inclusive Growth 33 F. Rates of Return to Schooling and Wage Structure 39 III. Human Development and Economic Growth 46 A. Impacts of Human Development on Economic Growth: Theory and Evidence 46 B. Growth Accounting 48 C. Role of Human Capital in Technological Progress 51 D. Labor Reallocation, Structural Transformation, and Growth 54 IV. Labor Supply and Education: Prospects and Challenges 60 A. Labor Supply 60 B. Labor Force Participation 62 C. Projections of Educational Attainment by Gender and Level 68 D. Demand and Supply of Workers 69 V. Skill Upgrading and Wage Inequality: A Microdata Analysis 72 A. Data and Empirical Methodology 73 B. Results from the Analysis of Microdata from the People’s Republic of China 74 C. Results from the Analysis of Indian Microdata 85 VI. Policy Challenges and Recommendations for Human Capital Development 100 A. Reducing Disparities in Accessibility and Improving Quality of Education 100 B. Skills Development 106 C. Employment and Labor Markets 112 D. Conclusion 114 References 118 iv Tables, Boxes, and Figures Boxes 1. Global Competitiveness Performance 7 2. What Explains Better PISA Test Scores? 22 3. Sequential Education Development in the Republic of Korea 101 4. Developing TVET through Changing Times—The Republic of Korea 107 5. The Training Levy and Human Resource Development Fund of Malaysia 110 Figures 1. Trends in Per Capita Gross Domestic Product in Selected Economies 3 2. Economic Structure—Gross Domestic Product and Employment Shares 5 3. Global Competitiveness Index 6 4. Trends in Educational Attainment 9 5. Gross Enrollment Ratios by Level 11 6. Literacy Rates for Population Aged 7 and Above in India 15 7. Educational Attainment in the People’s Republic of China by Cohort 16 8. Enrollment Rates in the People’s Republic of China by Cohort 17 9. Distribution of Educational Readiness Test Scores of 4- to 5-Year-Olds in Selected Regions in the People’s Republic of China 18 10. Reading and Math Performance among Rural Students in India 26 11. Reading and Math Performance among Rural Students in India Across States 27 12. Provincial Per Capita Education Spending and Income in the People’s Republic of China 28 13. Labor Force with Vocational Training in India 30 14. Proportion of Secondary Students Enrolled in Technical and/or Vocational Education Programs 31 15. Youth with Formal Skills Training in India 31 16. Size and Composition of Informal Employment in the Urban Labor Market in the People’s Republic of China 36 17. Formal and Informal Employment in India 38 18. Rates of Return to Education in Urban Areas in the People’s Republic of China 40 19. Indexed Real Weekly Urban Wage 41 20. Skill Premium for College and High School Graduates in the People’s Republic of China 42 21. Changes in the Gender Earnings Gap in Urban Areas in the People’s Republic of China 43 Tables, Boxes, and Figures v 22. Average Daily Wage among Regular Wage or Salaried Employees by Education in India, 2009–2010 44 23. Relative Wages by Educational Attainment and Gender in India 45 24. Sources of Annual Gross Domestic Product per Worker Growth in the People’s Republic of China and India 51 25. Average Annual Growth Rates of Valued Added Per Worker by Sector 55 26. Growth of Prime Working-Age Population in the People’s Republic of China and India 61 27. Structure of Population by Age and Sex 62 28. Labor Force Participation in India 63 29. Distribution of Female Labor Force Participation by Industry in India 65 30. Labor Force Participation in Urban Areas in the People’s Republic of China 65 31. Projections of Educational Attainment in the People’s Republic of China and India 69 32. Projected Demand and Supply of Workers by Educational Attainment, 2020 70 33. Projected Demand and Supply of Workers in India, 2020 71 34. Indexed Real Monthly Wages in Urban Areas in the People’s Republic of China 75 35.
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