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How Does Education Affect the Earnings Distribution in Urban China?

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  • Le Wang
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Abstract

China's phenomenal growth is accompanied by both relatively low level of standards of living and high inequality. It is widely believe that investing in education could be an effective strategy to promote higher standards of living as well as to reduce inequality. However, little is known about whether this belief is empirically supported. To this end, we employ a recently developed distributional approach to estimate returns to education across the whole earnings distribution in urban China during economic transition. We find that returns to education are generally more pronounced for individuals in the lower tail of the earnings distribution than for those in the upper tail, in stark contrast to the results found in developed countries. Our result implies that education indeed reduces earnings inequality while increasing individuals' earnings. We also find that the returns to education are uniformly larger for women than for men across the distribution. The results suggest the presence of added effects of education on earnings, as opposed to productivity-enhancing effects, for disadvantaged groups. Finally, we find that rates of educational return increased over time for all parts of the earnings distribution.

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File URL: http://hdl.handle.net/10.1111/10.1111/obes.2013.75.issue-3
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Bibliographic Info

Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics and Statistics.

Volume (Year): 75 (2013)
Issue (Month): 3 (06)
Pages: 435-454

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Handle: RePEc:bla:obuest:v:75:y:2013:i:3:p:435-454

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References

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  1. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, November.
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Cited by:
  1. Wang, Le, 2013. "Estimating returns to education when the IV sample is selective," Labour Economics, Elsevier, vol. 21(C), pages 74-85.
  2. Heckman, James J. & Yi, Junjian, 2012. "Human Capital, Economic Growth, and Inequality in China," IZA Discussion Papers 6550, Institute for the Study of Labor (IZA).
  3. Simone Balestra & Uschi Backes-Gellner, 2013. "Heterogeneous Returns to Education Over the Wage Distribution: Who Profits the Most?," Economics of Education Working Paper Series 0091, University of Zurich, Institute for Strategy and Business Economics (ISU).
  4. Wenshu Gao & Russell Smyth, 2012. "Returns to Schooling in Urban China, 2001-2010: Evidence from Three Waves of the China Urban Labor Survey," Monash Economics Working Papers 50-12, Monash University, Department of Economics.
  5. Vinod Mishra & Russell Smyth, 2012. "Returns to Schooling in Urban China: New Evidence Using Heteroskedasticity Restrictions to Obtain Identification Without Exclusion Restrictions," Monash Economics Working Papers 33-12, Monash University, Department of Economics.

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