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Education's role in China's structural transformation

  • Soohyung Lee
  • Benjamin A. Malin

We explore education's role in improving the allocation of labor between China's agricultural and nonagricultural sectors and measure the portion of China's recent growth attributable to this channel. Building from micro-level estimates, we find that education's impact on labor reallocation between sectors accounts for about 9 percent of Chinese growth, whereas its impact on within-sector human capital growth explains only 2 percent. Our findings suggest that, when frictions cause large productivity gaps across sectors and returns to education are greater in higher-productivity sectors, education policy may be a useful tool for increasing efficiency.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2009-41.

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Date of creation: 2009
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Handle: RePEc:fip:fedgfe:2009-41
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