IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v47y2015icp166-173.html
   My bibliography  Save this article

Estimating returns to schooling in urban China using conventional and heteroskedasticity-based instruments

Author

Listed:
  • Mishra, Vinod
  • Smyth, Russell

Abstract

A common problem when estimating the returns to schooling is the lack of conventional instrumental variables (IV) for education altogether or, if conventional IVs exist, there is often doubt as to whether they satisfy the exclusion restriction. We illustrate how a novel identification strategy, proposed by Lewbel (2012), which utilizes a heteroscedastic covariance restriction to construct an internal IV, can be used to obtain IV estimates for returns to education when alternatively there are no conventional IVs available or the conventional IVs that are available are potentially weak. To do so, we estimate the returns to schooling in urban China using two datasets. One dataset, which is for Shanghai, does not have any conventional IVs for education. The other dataset, which is for urban residents from across China, contains information on conventional IVs (parents' education). We find that, in the case of returns to schooling, the Lewbel method provides plausible estimates in datasets in which conventional IVs are not available and can be used to provide a robustness check on the findings from conventional IVs in datasets in which conventional IVs are available, but are weak. Our findings suggest that the method could prove useful in other contexts in which endogeneity is a problem and either conventional IVs are not available or those which are available may not satisfy the exclusion restriction.

Suggested Citation

  • Mishra, Vinod & Smyth, Russell, 2015. "Estimating returns to schooling in urban China using conventional and heteroskedasticity-based instruments," Economic Modelling, Elsevier, vol. 47(C), pages 166-173.
  • Handle: RePEc:eee:ecmode:v:47:y:2015:i:c:p:166-173
    DOI: 10.1016/j.econmod.2015.02.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S026499931500019X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fleisher, Belton M. & Wang, Xiaojun, 2005. "Returns to schooling in China under planning and reform," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 265-277, June.
    2. G. Reza Arabsheibani & Altay Mussurov, 2007. "Returns to schooling in Kazakhstan," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(2), pages 341-364, April.
    3. repec:taf:jnlbes:v:30:y:2012:i:1:p:67-80 is not listed on IDEAS
    4. Ge, Suqin & Yang, Dennis Tao, 2011. "Labor market developments in China: A neoclassical view," China Economic Review, Elsevier, vol. 22(4), pages 611-625.
    5. Clive R. Belfield & Inas Rashad Kelly, 2012. "The Benefits of Breast Feeding across the Early Years of Childhood," Journal of Human Capital, University of Chicago Press, vol. 6(3), pages 251-277.
    6. Filer, Randall K. & Jurajda, Stepan & Planovsky, Jan, 1999. "Education and wages in the Czech and Slovak Republics during transition," Labour Economics, Elsevier, vol. 6(4), pages 581-593, November.
    7. Joseph J. Sabia, 2007. "The Effect of Body Weight on Adolescent Academic Performance," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 871-900, April.
    8. Deolalikar, A.B., 1993. "gender Differences in the Returns to School Enrollment rates in Indonesia," Discussion Papers in Economics at the University of Washington 93-04, Department of Economics at the University of Washington.
    9. Inas Kelly & Dhaval Dave & Jody Sindelar & William Gallo, 2014. "The impact of early occupational choice on health behaviors," Review of Economics of the Household, Springer, vol. 12(4), pages 737-770, December.
    10. Sahoo, Amarendra & ten Raa, Thijs, 2012. "Wage–productivity differentials and Indian economic efficiency," Economic Modelling, Elsevier, vol. 29(2), pages 341-348.
    11. Belton M. Fleisher & Haizheng Li & Shi Li & Xiaojun Wang, 2000. "Sorting, Selection, and Transformation of the Return to College Education In China," William Davidson Institute Working Papers Series wp756, William Davidson Institute at the University of Michigan.
    12. James J. Heckman & Xuesong Li, 2004. "Selection bias, comparative advantage and heterogeneous returns to education: evidence from China in 2000," Pacific Economic Review, Wiley Blackwell, vol. 9(3), pages 155-171, October.
    13. Anil B. Deolalikar, 1993. "Gender Differences in the Returns to Schooling and in School Enrollment Rates in Indonesia," Journal of Human Resources, University of Wisconsin Press, vol. 28(4), pages 899-932.
    14. Russell Smyth & Xiaolei Qian & Ingrid Nielsen & Ines Kaempfer, 2013. "Working Hours in Supply Chain Chinese and Thai Factories: Evidence from the Fair Labor Association's ‘Soccer Project’," British Journal of Industrial Relations, London School of Economics, vol. 51(2), pages 382-408, June.
    15. Schultz, T. Paul, 1988. "Education investments and returns," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.),Handbook of Development Economics, edition 1, volume 1, chapter 13, pages 543-630, Elsevier.
    16. Zhu, Xi & Whalley, John & Zhao, Xiliang, 2014. "Intergenerational transfer, human capital and long-term growth in China under the one child policy," Economic Modelling, Elsevier, vol. 40(C), pages 275-283.
    17. Qadri, Faisal Sultan & Waheed, Abdul, 2014. "Human capital and economic growth: A macroeconomic model for Pakistan," Economic Modelling, Elsevier, vol. 42(C), pages 66-76.
    18. Hertel, Thomas & Zhai, Fan, 2006. "Labor market distortions, rural-urban inequality and the opening of China's economy," Economic Modelling, Elsevier, vol. 23(1), pages 76-109, January.
    19. Xiaolei Qian & Russell Smyth, 2008. "Private returns to investment in education: an empirical study of urban China," Post-Communist Economies, Taylor & Francis Journals, vol. 20(4), pages 483-501.
    20. Joseph J. Sabia, 2007. "Reading, Writing, And Sex: The Effect Of Losing Virginity On Academic Performance," Economic Inquiry, Western Economic Association International, vol. 45(4), pages 647-670, October.
    21. Pan, Lijun, 2014. "The impacts of education investment on skilled–unskilled wage inequality and economic development in developing countries," Economic Modelling, Elsevier, vol. 39(C), pages 174-181.
    22. Fleisher, Belton M. & Hu, Yifan & Li, Haizheng & Kim, Seonghoon, 2011. "Economic transition, higher education and worker productivity in China," Journal of Development Economics, Elsevier, vol. 94(1), pages 86-94, January.
    23. Björn Gustafsson & Shi Li, 2000. "Economic transformation and the gender earnings gap in urban China," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(2), pages 305-329.
    24. CHEN, Guifu & HAMORI, Shigeyuki, 2009. "Economic returns to schooling in urban China: OLS and the instrumental variables approach," China Economic Review, Elsevier, vol. 20(2), pages 143-152, June.
    25. Le Wang, 2013. "How Does Education Affect the Earnings Distribution in Urban China?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(3), pages 435-454, June.
    26. Chen, Jianxian & Shao, Xiaokuai & Murtaza, Ghulam & Zhao, Zhongxiu, 2014. "Factors that influence female labor force supply in China," Economic Modelling, Elsevier, vol. 37(C), pages 485-491.
    27. Zhang, Junsen & Zhao, Yaohui & Park, Albert & Song, Xiaoqing, 2005. "Economic returns to schooling in urban China, 1988 to 2001," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 730-752, December.
    28. Jalil, Abdul & Idrees, Muhammad, 2013. "Modeling the impact of education on the economic growth: Evidence from aggregated and disaggregated time series data of Pakistan," Economic Modelling, Elsevier, vol. 31(C), pages 383-388.
    29. Lei, Chaochao & Zhang, Rengui & Wu, Baocheng, 2013. "Labor reallocation in China: 1978–2011," Economic Modelling, Elsevier, vol. 35(C), pages 668-673.
    30. Haizheng Li & Yi Luo, 2004. "Reporting errors, ability heterogeneity, and returns to schooling in China," Pacific Economic Review, Wiley Blackwell, vol. 9(3), pages 191-207, October.
    31. Mishra, Vinod & Smyth, Russell, 2013. "Economic returns to schooling for China's Korean minority," Journal of Asian Economics, Elsevier, vol. 24(C), pages 89-102.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 岩﨑, 一郎 & 馬, 欣欣, 2019. "現代中国における男女賃金格差: メタ分析による接近," Discussion Paper Series 689, Institute of Economic Research, Hitotsubashi University.
    2. Anne Musson & Damien Rousselière, 2020. "Exploring the effect of crisis on cooperatives: a Bayesian performance analysis of French craftsmen cooperatives," Applied Economics, Taylor & Francis Journals, vol. 52(25), pages 2657-2678, May.
    3. Yao, Yao & Chen, George S. & Salim, Ruhul & Yu, Xiaojun, 2018. "Schooling returns for migrant workers in China: Estimations from the perspective of the institutional environment in a rural setting," China Economic Review, Elsevier, vol. 51(C), pages 240-256.
    4. Awaworyi Churchill, Sefa & Smyth, Russell, 2020. "Ethnic diversity, energy poverty and the mediating role of trust: Evidence from household panel data for Australia11We thank two referees for constructive comments. This article uses unit record data ," Energy Economics, Elsevier, vol. 86(C).
    5. Armenak Antinyan & Vardan Baghdasaryan & Aleksandr Grigoryan, 2018. "Social Preferences, Public Good Provision, Social Capital and Positional Concerns: Empirical Evidence from the South Caucasus," CERGE-EI Working Papers wp625, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    6. Posso, Alberto & Smith, Stephen C. & Ferrone, Lucia, 2019. "Do Constraints on Women Worsen Child Deprivations? Framework, Measurement, and Evidence from India," IZA Discussion Papers 12196, Institute of Labor Economics (IZA).
    7. Sefa Awaworyi Churchill & Russell Smyth, 2020. "Friendship network composition and subjective well-being," Oxford Economic Papers, Oxford University Press, vol. 72(1), pages 191-215.
    8. Sefa Awaworyi Churchill & Maria Rebecca Valenzuela & Wisdom Sablah, 2017. "Ethnic diversity and firm performance: Evidence from China’s materials and industrial sectors," Empirical Economics, Springer, vol. 53(4), pages 1711-1731, December.
    9. Sefa Awaworyi Churchill & Maria Rebecca Valenzuela, 2019. "Determinants of firm performance: does ethnic diversity matter?," Empirical Economics, Springer, vol. 57(6), pages 2079-2105, December.
    10. Bannier, Christina E. & Schwarz, Milena, 2018. "Gender- and education-related effects of financial literacy and confidence on financial wealth," Journal of Economic Psychology, Elsevier, vol. 67(C), pages 66-86.
    11. Prakash, Kushneel & Smyth, Russell, 2019. "‘The quintessential Chinese dream’? Homeownership and the subjective wellbeing of China's next generation," China Economic Review, Elsevier, vol. 58(C).
    12. Digvijay S. Negi & Bharat Ramaswami, 2020. "International risk sharing for food staples," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-002, Indira Gandhi Institute of Development Research, Mumbai, India.
    13. Wang, Haining & Cheng, Zhiming & Smyth, Russell, 2019. "Health outcomes, health inequality and Mandarin proficiency in urban China," China Economic Review, Elsevier, vol. 56(C), pages 1-1.
    14. Kim, Jun Sung & Lee, Jongkwan, 2019. "The role of intergenerational mobility in internal migration," Economic Modelling, Elsevier, vol. 81(C), pages 1-15.
    15. Justino, Patricia & Martorano, Bruno, 2018. "Welfare spending and political conflict in Latin America, 1970–2010," World Development, Elsevier, vol. 107(C), pages 98-110.
    16. Piekalkiewicz, Marcin, 2016. "Money, Social Capital and Materialism. Evidence from Happiness Data," EconStor Preprints 130185, ZBW - Leibniz Information Centre for Economics.
    17. Mallick, Debdulal & Nabin, Munirul H., 2018. "Cost effectiveness or serving the poor? Factors determining program placement of NGOs in Bangladesh," Economic Modelling, Elsevier, vol. 69(C), pages 281-290.
    18. Digvijay S. Negi & Pratap S. Birthal & Devesh Roy & Jaweriah Hazrana, 2020. "Market access, price policy and diversification in Indian agriculture," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-009, Indira Gandhi Institute of Development Research, Mumbai, India.
    19. Sefa Awaworyi Churchill & Lisa Farrell & Russell Smyth, 2019. "Neighbourhood ethnic diversity and mental health in Australia," Health Economics, John Wiley & Sons, Ltd., vol. 28(9), pages 1075-1087, September.
    20. Awaworyi Churchill, Sefa & Smyth, Russell, 2017. "Ethnic Diversity and Poverty," World Development, Elsevier, vol. 95(C), pages 285-302.
    21. Awaworyi Churchill, Sefa & Farrell, Lisa, 2018. "The impact of gambling on depression: New evidence from England and Scotland," Economic Modelling, Elsevier, vol. 68(C), pages 475-483.
    22. Awaworyi Churchill, Sefa & Smyth, Russell & Farrell, Lisa, 2020. "Fuel poverty and subjective wellbeing," Energy Economics, Elsevier, vol. 86(C).
    23. Patricia Justino & Bruno Martorano, 2017. "Welfare Spending and Political Conflict," HiCN Working Papers 256, Households in Conflict Network.
    24. Sefa Awaworyi Churchill & Samuelson Appau & Lisa Farrell, 2019. "Religiosity, income and wellbeing in developing countries," Empirical Economics, Springer, vol. 56(3), pages 959-985, March.
    25. Posso, Alberto, 2017. "Child Labour's effect on long-run earnings: An analysis of cohorts," Economic Modelling, Elsevier, vol. 64(C), pages 465-472.

    More about this item

    Keywords

    China; Schooling; Wages;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:47:y:2015:i:c:p:166-173. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Haili He). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.