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Does a foreign degree pay? The return to foreign education in China

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  • Mengmeng Guo
  • Yaxin Zhang
  • Jingjing Ye

Abstract

A large body of literature is devoted to estimating causal effects of schooling; however, few studies have addressed the returns on education overseas. In this paper, we focus on the causal impact of holding a foreign education degree on one's performance in the homeland labor market in the context of China, the world's leading source of students pursuing education overseas. To address the issue of endogeneity, we construct an instrumental variable based on the exchange rate when the individual is about to make further education plans to isolate the arguably exogenous cost‐side shocks to one's education decision. Utilizing data from the China Household Financial Survey, we find that holding a foreign education degree has no effect on one's propensity to join the labor market but leads to a 108.95% increase in one's wage upon employment. Moreover, such effects display significant heterogeneity among returnees regarding their background. Specifically, returnees earn less if they went abroad after China joined the WTO, work in public sectors or have rich family resources.

Suggested Citation

  • Mengmeng Guo & Yaxin Zhang & Jingjing Ye, 2019. "Does a foreign degree pay? The return to foreign education in China," Review of Development Economics, Wiley Blackwell, vol. 23(1), pages 415-434, February.
    • Handle: RePEc:bla:rdevec:v:23:y:2019:i:1:p:415-434
    DOI: 10.1111/rode.12550
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    Cited by:

    1. George Agiomirgianakis & Theodore Lianos & Nicholas Tsounis, 2019. "Returns to Investment in Distance Learning: the Case of Greece," International Business Research, Canadian Center of Science and Education, vol. 12(3), pages 94-100, March.
    2. Hou, Fei & Liu, Jie & Pang, Tingyun & Xiong, Hao, 2020. "Signing auditors’ foreign experience and audit pricing," Economic Modelling, Elsevier, vol. 91(C), pages 300-312.

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