Return to English Skills in China: Using a Nonparametric Bounding Approach

Using the pooled China General Social Survey (CGSS) data, this paper examines whether being proficient in English leads to higher wages in the Chinese labor market. We address endogenous selection into English investment and endogenous selection into work, while at the same time, we challenge some of the standard assumptions that are imposed in the parametric models. We employ a nonparametric bounding method as well as an instrumental variable to find out the upper bound average treatment effect (ATE) on the population. The nonparametric bounding approach reveals that IV estimators of the English proficiency (EP) could suffer from an upward bias in the study of its return on wages. Our empirical findings indicate that the wage returns to English skills are sizable. In addition, we find considerable heterogeneity in the economic returns to English abilities. The returns are statistically significant and higher for male workers and workers in urban areas. Also, the returns are larger from speaking than listening. Furthermore, the importance of English skills in the Chinese labor market shows no slowdown trend over time.