IDEAS home Printed from https://ideas.repec.org/p/mos/moswps/2012-33.html
   My bibliography  Save this paper

Returns to Schooling in Urban China: New Evidence Using Heteroskedasticity Restrictions to Obtain Identification Without Exclusion Restrictions

Author

Listed:
  • Vinod Mishra
  • Russell Smyth

Abstract

We estimate the returns to schooling using matched employer-employee data from Shanghai. To do so, we use a novel identification strategy, proposed by Lewbel (2012), which utilizes a heteroscedastic covariance restriction to construct an internal instrumental variable (IV). We find that, for the full sample, the Lewbel (2012) IV estimation suggests returns to schooling generally in the range 25-30 per cent, which is higher than extant studies using conventional IVs. The findings in this study underpin the need for the Chinese government to continue to invest in education and help explain why private demand for education remains strong, despite rising cost.

Suggested Citation

  • Vinod Mishra & Russell Smyth, 2012. "Returns to Schooling in Urban China: New Evidence Using Heteroskedasticity Restrictions to Obtain Identification Without Exclusion Restrictions," Monash Economics Working Papers 33-12, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2012-33
    as

    Download full text from publisher

    File URL: http://www.buseco.monash.edu.au/eco/research/papers/2012/3312retunsschoolingmishrasmyth.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Fleisher, Belton M. & Wang, Xiaojun, 2005. "Returns to schooling in China under planning and reform," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 265-277, June.
    2. G. Reza Arabsheibani & Altay Mussurov, 2007. "Returns to schooling in Kazakhstan," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(2), pages 341-364, April.
    3. Ge, Suqin & Yang, Dennis Tao, 2011. "Labor market developments in China: A neoclassical view," China Economic Review, Elsevier, vol. 22(4), pages 611-625.
    4. Clive R. Belfield & Inas Rashad Kelly, 2012. "The Benefits of Breast Feeding across the Early Years of Childhood," Journal of Human Capital, University of Chicago Press, vol. 6(3), pages 251-277.
    5. Filer, Randall K. & Jurajda, Stepan & Planovsky, Jan, 1999. "Education and wages in the Czech and Slovak Republics during transition," Labour Economics, Elsevier, vol. 6(4), pages 581-593, November.
    6. Yang, Dennis Tao, 2005. "Determinants of schooling returns during transition: Evidence from Chinese cities," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 244-264, June.
    7. Zhang, Junsen & Liu, Pak-Wai & Yung, Linda, 2007. "The Cultural Revolution and returns to schooling in China: Estimates based on twins," Journal of Development Economics, Elsevier, vol. 84(2), pages 631-639, November.
    8. Joseph J. Sabia, 2007. "The Effect of Body Weight on Adolescent Academic Performance," Southern Economic Journal, Southern Economic Association, vol. 73(4), pages 871-900, April.
    9. Inas Kelly & Dhaval Dave & Jody Sindelar & William Gallo, 2014. "The impact of early occupational choice on health behaviors," Review of Economics of the Household, Springer, vol. 12(4), pages 737-770, December.
    10. Belton M. Fleisher & Haizheng Li & Shi Li & Xiaojun Wang, 2000. "Sorting, Selection, and Transformation of the Return to College Education In China," William Davidson Institute Working Papers Series wp756, William Davidson Institute at the University of Michigan.
    11. Hongbin Li & Pak Wai Liu & Ning Ma & Junsen Zhang, 2005. "Does Education Pay in Urban China? Estimating Returns to Education Using Twins," Discussion Papers 00013, Chinese University of Hong Kong, Department of Economics.
    12. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    13. Schultz, T. Paul, 1988. "Education investments and returns," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 13, pages 543-630 Elsevier.
    14. Gorodnichenko, Yuriy & Sabirianova Peter, Klara, 2005. "Returns to schooling in Russia and Ukraine: A semiparametric approach to cross-country comparative analysis," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 324-350, June.
    15. John Knight & Lina Song, 2003. "Increasing urban wage inequality in China," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(4), pages 597-619, December.
    16. Anna Folke Larsen & John Rand & Nina Torm, 2011. "Do Recruitment Ties Affect Wages? An Analysis using Matched Employer–Employee Data from Vietnam," Review of Development Economics, Wiley Blackwell, vol. 15(3), pages 541-555, August.
    17. Hai Fang & Karen N. Eggleston & John A. Rizzo & Scott Rozelle & Richard J. Zeckhauser, 2012. "The Returns to Education in China: Evidence from the 1986 Compulsory Education Law," NBER Working Papers 18189, National Bureau of Economic Research, Inc.
    18. Trostel, Philip & Walker, Ian & Woolley, Paul, 2002. "Estimates of the economic return to schooling for 28 countries," Labour Economics, Elsevier, vol. 9(1), pages 1-16, February.
    19. Xiaolei Qian & Russell Smyth, 2008. "Private returns to investment in education: an empirical study of urban China," Post-Communist Economies, Taylor & Francis Journals, vol. 20(4), pages 483-501.
    20. Kang, Lili & Peng, Fei, 2012. "Siblings, public facilities and education returns in China," MPRA Paper 38922, University Library of Munich, Germany.
    21. Li, Hongbin & Liu, Pak Wai & Zhang, Junsen, 2012. "Estimating returns to education using twins in urban China," Journal of Development Economics, Elsevier, vol. 97(2), pages 494-504.
    22. Fleisher, Belton M. & Sabirianova, Klara & Wang, Xiaojun, 2005. "Returns to skills and the speed of reforms: Evidence from Central and Eastern Europe, China, and Russia," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 351-370, June.
    23. Wang, Le, 2012. "Economic transition and college premium in urban China," China Economic Review, Elsevier, vol. 23(2), pages 238-252.
    24. Fleisher, Belton M. & Hu, Yifan & Li, Haizheng & Kim, Seonghoon, 2011. "Economic transition, higher education and worker productivity in China," Journal of Development Economics, Elsevier, vol. 94(1), pages 86-94, January.
    25. Björn Gustafsson & Shi Li, 2000. "Economic transformation and the gender earnings gap in urban China," Journal of Population Economics, Springer;European Society for Population Economics, vol. 13(2), pages 305-329.
    26. CHEN, Guifu & HAMORI, Shigeyuki, 2009. "Economic returns to schooling in urban China: OLS and the instrumental variables approach," China Economic Review, Elsevier, vol. 20(2), pages 143-152, June.
    27. Le Wang, 2013. "How Does Education Affect the Earnings Distribution in Urban China?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(3), pages 435-454, June.
    28. Kevin Denny & Veruska Oppedisano, 2010. "Class size effects: evidence using a new estimation technique," Working Papers 201051, Geary Institute, University College Dublin.
    29. vinod Mishra & Russell Smyth, 2010. "Economic Returns to Schooling for China’s Korean Minority," Monash Economics Working Papers 37-10, Monash University, Department of Economics.
    30. Zhang, Junsen & Zhao, Yaohui & Park, Albert & Song, Xiaoqing, 2005. "Economic returns to schooling in urban China, 1988 to 2001," Journal of Comparative Economics, Elsevier, vol. 33(4), pages 730-752, December.
    31. Tian Qiu & John Hudson, 2010. "Private returns to education in urban China," Economic Change and Restructuring, Springer, vol. 43(2), pages 131-150, May.
    32. Haizheng Li & Yi Luo, 2004. "Reporting errors, ability heterogeneity, and returns to schooling in China," Pacific Economic Review, Wiley Blackwell, vol. 9(3), pages 191-207, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:taf:rjapxx:v:20:y:2015:i:2:p:178-201 is not listed on IDEAS
    2. Briggs, Adam & Chowdhury, Shyamal, 2014. "Economic Development, Food Demand and the Consequences for Agricultural Resource Requirements (Indonesia)," 2014 Conference (58th), February 4-7, 2014, Port Macquarie, Australia 165808, Australian Agricultural and Resource Economics Society.
    3. Wenshu Gao & Russell Smyth, 2012. "Returns to Schooling in Urban China, 2001-2010: Evidence from Three Waves of the China Urban Labor Survey," Monash Economics Working Papers 50-12, Monash University, Department of Economics.

    More about this item

    Keywords

    China; Schooling; Income; Lewbel;

    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mos:moswps:2012-33. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simon Angus). General contact details of provider: http://edirc.repec.org/data/dxmonau.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.