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Selection bias, comparative advantage and heterogeneous returns to education: evidence from China in 2000

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  • James J. Heckman
  • Xuesong Li

Abstract

This paper uses Chinese micro data and new semi-parametric methods to estimate the current return to college education allowing for heterogeneous returns and for self-selection into schooling based on them. OLS and IV methods do not properly account for this sorting. Our estimates suggest that, for a randomly selected young person from an urban area, college attendance leads to a 43% increase in lifetime earnings (nearly 11% annually) in 2000, compared with just 36% (nearly 9% annually) for those who do not attend. Our evidence suggests that the return to education has increased substantially in China since the early 1990s. Copyright 2004 Blackwell Publishing Ltd

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Pacific Economic Review.

Volume (Year): 9 (2004)
Issue (Month): 3 (October)
Pages: 155-171

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Handle: RePEc:bla:pacecr:v:9:y:2004:i:3:p:155-171

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References

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  1. James Heckman & Salvador Navarro-Lozano, 2004. "Using Matching, Instrumental Variables, and Control Functions to Estimate Economic Choice Models," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 30-57, February.
  2. Heckman, James J. & Lochner, Lance & Todd, Petra E., 2003. "Fifty Years of Mincer Earnings Regressions," IZA Discussion Papers 775, Institute for the Study of Labor (IZA).
  3. Carneiro, Pedro & Heckman, James J., 2002. "The Evidence on Credit Constraints in Post-Secondary Schooling," IZA Discussion Papers 518, Institute for the Study of Labor (IZA).
  4. Griliches, Zvi, 1977. "Estimating the Returns to Schooling: Some Econometric Problems," Econometrica, Econometric Society, vol. 45(1), pages 1-22, January.
  5. James Heckman, 1997. "Instrumental Variables: A Study of Implicit Behavioral Assumptions Used in Making Program Evaluations," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 441-462.
  6. James J. Heckman & Edward J. Vytlacil, 2000. "Local Instrumental Variables," NBER Technical Working Papers 0252, National Bureau of Economic Research, Inc.
  7. Bjorklund, Anders & Moffitt, Robert, 1987. "The Estimation of Wage Gains and Welfare Gains in Self-selection," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 42-49, February.
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Citations

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Cited by:
  1. Belton M. Fleisher & Xiaojun Wang, 2004. "Returns to Schooling in China Under Planning and Reform," William Davidson Institute Working Papers Series 2004-704, William Davidson Institute at the University of Michigan.
  2. Fleisher, Belton M. & Li, Haizheng & Zhao, Min Qiang, 2008. "Human Capital, Economic Growth, and Regional Inequality in China," IZA Discussion Papers 3576, Institute for the Study of Labor (IZA).
  3. Fleisher, Belton M. & Sabirianova, Klara & Wang, Xiaojun, 2005. "Returns to skills and the speed of reforms: Evidence from Central and Eastern Europe, China, and Russia," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 351-370, June.
  4. CHEN, Guifu & HAMORI, Shigeyuki, 2009. "Economic returns to schooling in urban China: OLS and the instrumental variables approach," China Economic Review, Elsevier, vol. 20(2), pages 143-152, June.
  5. Zhu, Rong, 2011. "Individual heterogeneity in returns to education in urban China during 1995-2002," Economics Letters, Elsevier, vol. 113(1), pages 84-87, October.
  6. Tavneet Suri, 2006. "Selection and Comparative Advantage in Technology Adoption," Working Papers 944, Economic Growth Center, Yale University.
  7. Li, Shi & Xing, Chunbing, 2010. "China's Higher Education Expansion and its Labor Market Consequences," IZA Discussion Papers 4974, Institute for the Study of Labor (IZA).
  8. Hongbin Li & Pak Wai Liu & Ning Ma & Junsen Zhang, 2005. "Does Education Pay in Urban China? Estimating Returns to Education Using Twins," Discussion Papers 00013, Chinese University of Hong Kong, Department of Economics.
  9. Luo, Xubei & Zhu, Nong, 2008. "Rising income inequality in China : a race to the top," Policy Research Working Paper Series 4700, The World Bank.
  10. Fleisher, Belton M. & Hu, Yifan & Li, Haizheng & Kim, Seonghoon, 2011. "Economic transition, higher education and worker productivity in China," Journal of Development Economics, Elsevier, vol. 94(1), pages 86-94, January.
  11. Agnes E. Walker & Stephen Colagiuri, 2011. "Cost-Benefit Model System of Chronic Diseases in Australia to Assess and Rank Prevention and Treatment Options," International Journal of Microsimulation, Interational Microsimulation Association, vol. 4(3), pages 57-70.

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