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Economic transition, higher education and worker productivity in China

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  • Fleisher, Belton M.
  • Hu, Yifan
  • Li, Haizheng
  • Kim, Seonghoon

Abstract

We investigate the role of education on worker productivity and firms' total factor productivity using a panel of firm-level data from China. We estimate the returns to education by calculating the marginal productivity of workers of different education levels based on estimates of the firm-level production function. We also estimate how the education level of workers and CEO contributes to firms' total factor productivity. Estimated marginal products are much higher than wages, and the gap is larger for highly educated workers. Our estimate shows that an additional year of schooling raises marginal product by 30.1%, and that CEO's education increases TFP for foreign-invested firms. Estimates vary substantially across ownership classes, the effect of schooling on productivity being highest in foreign-invested firms. We infer that market mechanisms contribute to a more efficient use of human capital within firms.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 94 (2011)
Issue (Month): 1 (January)
Pages: 86-94

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Handle: RePEc:eee:deveco:v:94:y:2011:i:1:p:86-94

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Productivity Returns to education Marginal product Firm China Transition;

References

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Citations

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Cited by:
  1. Tian, Xu & Yu, Xiaohua, 2012. "The Enigmas of TFP in China: A meta-analysis," China Economic Review, Elsevier, vol. 23(2), pages 396-414.
  2. Zhang, W.-B., 2014. "Ethnic Human Capital Externalities and Inequality in a General Equilibrium Growth Model," Journal of the New Economic Association, New Economic Association, vol. 21(1), pages 33-54.
  3. Vinod Mishra & Russell Smyth, 2012. "Returns to Schooling in Urban China: New Evidence Using Heteroskedasticity Restrictions to Obtain Identification Without Exclusion Restrictions," Development Research Unit Working Paper Series 33-12, Monash University, Department of Economics.
  4. Yuanyuan Chen & Shuaizhang Feng, 2011. "Parental education and wages: Evidence from China," Frontiers of Economics in China, Springer, vol. 6(4), pages 568-591, December.
  5. Andersson, Fredrik N. G. & Edgerton, David & Opper, Sonja, 2011. "A Matter of Time: Revisiting Growth Convergence in China," Working Papers 2011:23, Lund University, Department of Economics, revised 01 Mar 2012.
  6. Wei-Bin ZHANG, 2014. "Human Capital, Wealth, and Renewable Resources," Expert Journal of Economics, Sprint Investify, vol. 2(1), pages 1-20.
  7. Josef C. Brada & El-hadj Bah, 2014. "Growing Income Inequality as a Challenge to 21st Century Capitalism," a/ Working Papers Series 1402, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
  8. Wei-Bin Zhang, 2013. "Education, Endogenous Human Capital, and Monetary Economic Growth with MIU Approach," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 7(2), pages 100-118, July.
  9. Lam, Kevin C.K. & McGuinness, Paul B. & Vieito, João Paulo, 2013. "CEO gender, executive compensation and firm performance in Chinese‐listed enterprises," Pacific-Basin Finance Journal, Elsevier, vol. 21(1), pages 1136-1159.
  10. Wang, Le, 2012. "Estimating Returns to Education when the IV Sample is Selective," IZA Discussion Papers 7103, Institute for the Study of Labor (IZA).
  11. Wei-Bin Zhang, 2013. "A Synthesis Of The Uzawa-Lucas Model With The Walrasian-General-Equilibrium And Neoclassical-Growth Theories," Economic Annals, Faculty of Economics, University of Belgrade, vol. 58(199), pages 7-38, October -.
  12. Li, Hongbin & Meng, Lingsheng & Shi, Xinzheng & Wu, Binzhen, 2012. "Does attending elite colleges pay in China?," Journal of Comparative Economics, Elsevier, vol. 40(1), pages 78-88.
  13. Lee, Soohyung & Malin, Benjamin A., 2013. "Education's role in China's structural transformation," Journal of Development Economics, Elsevier, vol. 101(C), pages 148-166.
  14. Wang, Le, 2011. "How Does Education Affect the Earnings Distribution in Urban China?," IZA Discussion Papers 6173, Institute for the Study of Labor (IZA).
  15. Wang, Le, 2012. "Economic transition and college premium in urban China," China Economic Review, Elsevier, vol. 23(2), pages 238-252.
  16. David Mayston & Juan Yang, 2012. "Education, Risk and Efficiency in Human Capital Investment," Discussion Papers 12/15, Department of Economics, University of York.

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