Human Capital Access for Chinese Private Firms: Ownership Effect and Firm Performance

Abstract: This paper examines the standing of private firms in the post-privatization economic reform in China regarding their access to human capital. The cross-sectional dataset used to test the model is extracted from the World Bank 2012 Enterprise Survey. Using a sample of 2848 Chinese firms of diverse ownership types, the paper studies the effect of firm ownership on human capital, and further studies the effect of human capital on firm performance in terms of growth and expansion possibilities. The results are mixed: significant evidence supporting the claim that private firms are human capital constrained in terms of skilled and trained labor force, yet also suggesting that private firms get better educated labor compared to their state-owned counterparts. It might no longer be the case that private firms are disadvantaged in the access to the more educated labor, but only in the utilization of such qualified labor. The findings also suggest that the presence of skilled labor in private firms significantly improves their performance. The outcomes propose that the reforms are far from perfect or complete for China which is still expected to undergo a lot of changes to successfully finish its transition and preserve its rapidly growing trajectory. To succeed in acquiring the qualified labor with good human capital, policy recommendations might consider paying more attention to the pool of talent within the country and the recruitment channels, and also supplying the private firms with the needed funds for adopting training programs.