Dynamic Efficiency Compensation of Consumption and Human Capital and Its Innovation Effect

【Authors】

NAN Yu, YANG Xinming

【WorkUnit】

NAN Yu （Institute of Economics, Chinese Academy of Social Sciences, 100836）;YANG Xinming （Institute of Information Studies, Chinese Academy of Social Sciences, 100732）

【Abstract】

As the process of tertiarization accelerates, urbanization driven by domestic demand relies on the service industry and consumption to provide efficiency compensation, which is the fundamental requirement for improving innovation efficiency. The simultaneous upgrading of the consumption structure and human capital is beneficial to promote the virtuous interaction between knowledge production and consumption, which is key to overcoming the “cost disease” in the post-industrialization stage. This paper explores the dynamic efficiency compensation mechanism of consumption and human capital, and analyzes whether their interaction can achieve synergistic upgrading of consumption and human capital and enhance innovation effects through empirical testing. The research finds that the dynamic efficiency compensation mechanism of consumption and human capital is key to improving innovation efficiency, but the synergistic upgrading effect of consumption and human capital can only be realized when human capital accumulation reaches a certain threshold. The main contributions of this paper are as follows. First, while previous studies have explored the micro-level impact of consumption on healthy human capital and the macro-level relationship between human capital and innovation growth, this paper attempts to explore how consumption-human capital interaction establishes a dynamic efficiency compensation mechanism, thereby linking consumption and innovation growth. Second, this paper provides an in-depth analysis of how dynamic efficiency compensation and collaborative upgrading of consumption and human capital enhance innovation efficiency, offering valuable insights into reshaping growth efficiency models. Third, this paper examines in detail the heterogeneity of the consumption upgrading process across regions and countries, enriching the research on consumption upgrading and innovation growth. In 2023, China’s per capita consumption expenditure on science, education, culture and health accounted for 22.6%, lagging behind the averages of the United States and Japan in the 1970s and the Republic of Korea in the 1980s. This lagging consumption upgrading means that the dynamic efficiency compensation mechanism and the virtuous interaction between consumption and human capital have not been effectively established. In response, this paper proposes several policy recommendations: strengthening and expanding vocational skills training, promoting the popularization and inclusive development of higher education, and inducing consumption upgrading through the continuous accumulation of human capital. Additionally, increasing the supply of public services such as education and health, advancing market-oriented reforms to improve supply efficiency, and stimulating residents’ consumption potential are all essential. At the same time, it is necessary to give full play to the demonstration and leading role of developed regions in the coordinated upgrading of consumption and human capital.

【KeyWords】

Consumption Upgrading, Human Capital, Collaborative Upgrading, Dynamic Efficiency Compensation, Innovative Growth