Stages of Economic Development and Convergence and the Changing Demand for Human Capital

Abstract

The last chapter discussed the transformation of human capital and its association with cycles of innovative economic development. That chapter described how new innovations lead to subsequent cycles of economic activity which may in turn induce structural changes within the economy. Technological change which induces structural transformations of the economy generally favours workers with higher levels of human capital, so that human capital also goes through a transformation. Innovations have been described as creative destructions which bring into existence various cycles, such as innovation and product cycles, import and export cycles, and the capital-goods cycles. Each of these results in different demands placed on human capital, and thereby induces further transformations in human capital, which may turn a country’s comparative advantage into a competitive advantage within a globalized economy. China’s transformation of human capital has also been identified as vital if China is to achieve a competitive rather than a comparative advantage.