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Rational Expectation and Education Rewarding: The Case of Chinese Off-Farm Wage Employment

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  • Hou, Linke
  • Wang, Xiaobing
  • Yu, Xiaohua

Abstract

This study establishes a life-cycle model that a representative agent chooses optimal time of education to maximize his/her life earning, which implies that there may exist nonlinear relation between education and earning. Using the data of Chinese off-farm wage employment, we find that the duration of schooling years will increase by 1.7 years with 1 percent increase in rate of return to education. The empirical results also indicate that controversies about return to education might arise from model misspecification without consideration of nonlinearity and sample selection.

Suggested Citation

  • Hou, Linke & Wang, Xiaobing & Yu, Xiaohua, 2011. "Rational Expectation and Education Rewarding: The Case of Chinese Off-Farm Wage Employment," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114530, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae11:114530
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    References listed on IDEAS

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    1. Jaeger, David A & Page, Marianne E, 1996. "Degrees Matter: New Evidence on Sheepskin Effects in the Returns to Education," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 733-740, November.
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    3. Russell Smyth & Qingguo Zhai & Xiaoxu Li, 2009. "Determinants of turnover intentions among Chinese off farm migrants," Economic Change and Restructuring, Springer, vol. 42(3), pages 189-209, August.
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    6. Alan de Brauw & Scott Rozelle, 2008. "Reconciling the Returns to Education in Off-Farm Wage Employment in Rural China," Review of Development Economics, Wiley Blackwell, vol. 12(1), pages 57-71, February.
    7. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters,in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    8. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 11-44, August.
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    14. Vincent (Vincent Peter) Hogan & Ian Walker, 2003. "Education choice under uncertainty and public policy," Working Papers 200302, School of Economics, University College Dublin.
    15. de Brauw, Alan & Huang, Jikun & Rozelle, Scott & Zhang, Linxiu & Zhang, Yigang, 2002. "The Evolution of China's Rural Labor Markets During the Reforms," Journal of Comparative Economics, Elsevier, vol. 30(2), pages 329-353, June.
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    More about this item

    Keywords

    return to schooling; life-cycle model; rational expectation; China; Labor and Human Capital; I20; J43; Q01;

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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