How Does Education Affect the Earnings Distribution in Urban China?
AbstractChina'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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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6173.
Length: 51 pages
Date of creation: Nov 2011
Date of revision:
Publication status: published online in: Oxford Bulletin of Economics and Statistics, 2012, [Early View]
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Find related papers by JEL classification:
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J7 - Labor and Demographic Economics - - Labor Discrimination
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, and Immigrants; Non-labor Discrimination
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-13 (All new papers)
- NEP-EDU-2011-12-13 (Education)
- NEP-LAB-2011-12-13 (Labour Economics)
- NEP-LMA-2011-12-13 (Labor Markets - Supply, Demand, & Wages)
- NEP-TRA-2011-12-13 (Transition Economics)
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