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Returns to Schooling in Urban China: New Evidence Using Heteroskedasticity Restrictions to Obtain Identification Without Exclusion Restrictions

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  • Vinod Mishra
  • Russell Smyth

Abstract

We estimate the returns to schooling using matched employer-employee data from Shanghai. To do so, we use a novel identification strategy, proposed by Lewbel (2012), which utilizes a heteroscedastic covariance restriction to construct an internal instrumental variable (IV). We find that, for the full sample, the Lewbel (2012) IV estimation suggests returns to schooling generally in the range 25-30 per cent, which is higher than extant studies using conventional IVs. The findings in this study underpin the need for the Chinese government to continue to invest in education and help explain why private demand for education remains strong, despite rising cost.

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Bibliographic Info

Paper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 33-12.

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Length: 31 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:mos:moswps:2012-33

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Keywords: China; Schooling; Income; Lewbel;

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References

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Cited by:
  1. Wenshu Gao & Russell Smyth, 2012. "Returns to Schooling in Urban China, 2001-2010: Evidence from Three Waves of the China Urban Labor Survey," Development Research Unit Working Paper Series 50-12, Monash University, Department of Economics.
  2. Briggs, Adam & Chowdhury, Shyamal, 2014. "Economic Development, Food Demand and the Consequences for Agricultural Resource Requirements (Indonesia)," 2014 Conference (58th), February 4-7, 2014, Port Maquarie, Australia 165808, Australian Agricultural and Resource Economics Society.

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