Should Chinese government enhance Human Capital Investment in less developed areas? An analysis based on social internal rate of return

摘要

Based on production function, total factor productivity (TFP) equation, the formula of average years of education and 1978–2005 provincial panel data, this paper estimates social internal rates of return to education at different levels in China. The results indicate that the social internal rates of return to higher education, senior and junior secondary education, and primary education are relatively higher in China, furthermore, the social internal rates of return to senior and junior secondary education are the highest, while the social internal rate of return to higher education is the lowest; the social internal rates of return to all levels of education of central and west regions are not lower than those of east region. So government's decision to further enhance investment in education and assist the less developed areas to develop education is rational. As far as the structure of educational investment, the government should continue to make nine-year compulsory education universal across the country, and make great efforts to develop senior secondary education, and should continue to improve the quality of higher education.