Avoiding the middle-income trap: The spatial-temporal effects of human capital on regional economic growth in Northeast China

Northeast China has seen a remarkable transition from rustbelt to economic revival over the past decade. However, promoting sustainable economic growth is a major issue facing Northeast China after entering the middle-income stage of development. Based on a panel data set of 34 prefecture-level cities in Northeast China from 2001 to 2018, this paper constructs a human capital index in terms of both quantity (educational capital) and quality (health capital) and uses the generalized method of moments (GMMs) to explore the spatial-temporal effects of human capital on economic growth under the "middle-income trap." The results show that a key factor keeping Northeast China in the middle-income stage is the loss of highly qualified labor and that the previous attribution of the economic downturn to the population exodus is inaccurate. Although the results of this study indicate that the demographic dividend during the demographic transition period has ended in Northeast China and that the associated low-cost advantage has been lost, the "talent dividend" can still be obtained by improving the level of human capital and thus promoting sustainable economic growth.