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The Returns to Education in China: Evidence from the 1986 Compulsory Education Law

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  • Hai Fang
  • Karen N. Eggleston
  • John A. Rizzo
  • Scott Rozelle
  • Richard J. Zeckhauser

Abstract

As China transforms from a socialist planned economy to a market-oriented economy, its returns to education are expected to rise to meet those found in middle-income established market economies. This study employs a plausible instrument for education: the China Compulsory Education Law of 1986. We use differences among provinces in the dates of effective implementation of the compulsory education law to show that the law raised overall educational attainment in China by about 0.8 years of schooling. We then use this instrumental variable to control for the endogeneity of education and estimate the returns to an additional year of schooling in 1997-2006. Results imply that the overall returns to education are approximately 20 percent per year on average in contemporary China, fairly consistent with returns found in most industrialized economies. Returns differ among subpopulations; they increase after controlling for endogeneity of education.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18189.

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Date of creation: Jun 2012
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Handle: RePEc:nbr:nberwo:18189

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Cited by:
  1. 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.
  2. Rod Tyers, 2013. "Looking Inward for Transformative Growth in China," CAMA Working Papers 2013-48, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Simone Balestra & Uschi Backes-Gellner, 2013. "Heterogeneous Returns to Education Over the Wage Distribution: Who Profits the Most?," Economics of Education Working Paper Series 0091, University of Zurich, Institute for Strategy and Business Economics (ISU).
  4. 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.
  5. Richard J. Murnane & Alejandro J. Ganimian, 2014. "Improving Educational Outcomes in Developing Countries: Lessons from Rigorous Evaluations," NBER Working Papers 20284, National Bureau of Economic Research, Inc.
  6. La, Vincent, 2014. "Does Schooling Pay? Evidence from China," MPRA Paper 54578, University Library of Munich, Germany.

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