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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
    DOI: 10.22004/ag.econ.114530
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