The economic impact and determinants of investment in human and political capital in China

While much attention has been focused on the role of human capital in generating economic growth at both the individual and the aggregate level, researchers have begun only recently to pay attention to other forms of nonphysical capital, such as religious capital, social capital, and ethnic capital, and analyzed their interplay with human capital in determining earnings and in influencing intergenerational mobility. They have shown that nonphysical capital can broaden an individual's opportunity set and raise the productivity of human capital. This article introduces political capital into the standard human-capital framework and empirically analyzes its role in conjunction with human capital in determining income distribution. Specifically, we address two issues. The first concerns income determination in urban China, focusing on the role of human and political capital as productive factors that affect economic outcomes. To the extent that human and political capital are important determinants of income, the second issue investigated is what affects investment in these two types of capital.