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Explaining Rising Returns to Education in Urban China in the 1990s

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  • Liu, Xuejun

    (Beijing Normal University)

  • Park, Albert

    (Hong Kong University of Science & Technology)

  • Zhao, Yaohui

    (Peking University)

Abstract

Although theory predicts that international trade will decrease the relative demand for skilled workers in relatively skill-deficit countries, in recent decades many developing countries have experienced rising wage premiums for skilled workers. We examines this puzzle by quantifying the relative importance of different supply and demand factors in explaining the rapid increase in the returns to education experienced by China during the 1990s. Analyzing Chinese urban household survey and census data for six provinces, we find that although changes in the structure of demand did reduce the demand for skilled workers, consistent with trade theory, the magnitude of the effect was modest and more than offset by institutional reforms and technological changes that increased the relative demand for skill.

Suggested Citation

  • Liu, Xuejun & Park, Albert & Zhao, Yaohui, 2010. "Explaining Rising Returns to Education in Urban China in the 1990s," IZA Discussion Papers 4872, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp4872
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    Cited by:

    1. Xiangcai Meng & Azhong Ye, 2009. "Human Capital Externality, Knowledge Spillover, and Sustainable Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 10(1), pages 155-198, May.
    2. Nie, Haifeng & Xing, Chunbing, 2019. "Education expansion, assortative marriage, and income inequality in China," China Economic Review, Elsevier, vol. 55(C), pages 37-51.
    3. Xin Meng & Kailing Shen & Sen Xue, 2010. "Economic Reform, Education Expansion, and Earnings Inequality for Urban Males in China, 1988-2007," CEPR Discussion Papers 639, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    4. Lili Kang & Fei Peng, 2012. "A selection analysis of returns to education in China," Post-Communist Economies, Taylor & Francis Journals, vol. 24(4), pages 535-554, March.
    5. repec:wyi:journl:002165 is not listed on IDEAS
    6. Wang, Le, 2012. "Economic transition and college premium in urban China," China Economic Review, Elsevier, vol. 23(2), pages 238-252.
    7. Xing, Chunbing & Sun, Yan & Luo, Chuliang, 2023. "Higher Education Opportunity and the Choice of Vocational vs. Academic High School," IZA Discussion Papers 16149, Institute of Labor Economics (IZA).
    8. John WHALLEY & Chunbing XING, 2014. "The regional distribution of skill premia in urban China: Implications for growth and inequality," International Labour Review, International Labour Organization, vol. 153(3), pages 395-419, September.

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    More about this item

    Keywords

    education; earnings; inequality; China;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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