Capital input, labor structure and relative efficiency of human capital investment

Influence of capital input and labor structure on relative efficiency of human capital investment was analyzed by nested CES production function containing capital, skilled labor and unskilled labor．The relative efficiency of human capital investment was calculated, factors that influencing efficiency of human capital investment were examined, all based on Chinese provincial panel data from 2004-2018．The relative investment efficiency of human capital from 2004-2018 was found to show a slight upward trend．The relative investment of skilled and unskilled labor was found to reduce relative efficiency of human capital investment, but capital quality effect and capital-skill matching effect improved efficiency of human capital investment．The influence of capital input and labor structure on efficiency of human capital investment was limited by elasticity of factor substitution．Unskilled labor force showed crowding-out effect, but skilled labor force showed crowding-in effect．At the regional level, demand for labor showed variations in different regions, but investment efficiency was effectively improved after increasing input of skilled labor or adjusting structure of labor and capital．Improvement of industrial structure transformation and upgrading level and the proportion of skilled labor input were found to effectively reduce skill premium, thus reducing relative human capital investment efficiency．The level of industrial structure transformation and upgrading will reduce relative human capital investment efficiency when proportion of skilled labor input is low．The influence of the level of industrial structure transformation and upgrading on the relative efficiency of human capital investment was found to vary greatly in different regions．Differences in industrial structure in different regions were identified, performance in eastern regions was found stronger than central and western regions．