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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.

Suggested Citation

  • 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.
    • Handle: RePEc:mos:moswps:2012-33
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    References listed on IDEAS

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    Cited by:

    1. Wenshu Gao & Russell Smyth, 2015. "Education expansion and returns to schooling in urban China, 2001–2010: evidence from three waves of the China Urban Labor Survey," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 20(2), pages 178-201, April.
    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 Macquarie, Australia 165808, Australian Agricultural and Resource Economics Society.
    3. 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.

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    More about this item

    Keywords

    China; Schooling; Income; Lewbel;
    All these keywords.

    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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