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The role of education in wage determination in China's rural industrial sector


  • meng, xin


The TVP labour market has undergone a great change during the economic reform period. Starting from a fully controlled recruitment system, more employees obtained employment through a more market oriented mechanism. This study applies human capital theory to investigate the impact of this institutional change on TVP wage determination. It is found that education as one of most important human capital variables plays an important role on the wage determination of those who obtained jobs through own effort (the market group), while it is insignificant for those who were assigned to the jobs (the non-market group). The further analysis suggests that although education plays different role on the market and non-market groups wage determination they are both productivity orientated. And the reason for this might be that the underlying technological processes of the work undertaken by the market group is higher than that for the non-market group. Does education, therefore, plays no role for the non-market group? The paper employs a logit model to prove that education is an important determinant for both the market and the non-market groups' occupational attainment. This suggests the following general picture: for the market group, there is a direct relationship between education, occupation and wage determination; for the non-market group this relationship is somewhat indirect. The rate of return to education is more likely to be reflected by non-wage benefit.

Suggested Citation

  • meng, xin, 1995. "The role of education in wage determination in China's rural industrial sector," MPRA Paper 1343, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:1343

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    References listed on IDEAS

    1. Wolpin, Kenneth I, 1977. "Education and Screening," American Economic Review, American Economic Association, vol. 67(5), pages 949-958, December.
    2. McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
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    Cited by:

    1. Moock, Peter R. & Patrinos, Harry Anthony & Venkataraman, Meera, 1998. "Education and earnings in a transition economy (Vietnam)," Policy Research Working Paper Series 1920, The World Bank.
    2. Zhang, Linxiu & Huang, Jikun & Rozelle, Scott, 2002. "Employment, emerging labor markets, and the role of education in rural China," China Economic Review, Elsevier, vol. 13(2-3), pages 313-328.
    3. Linxiu Zhang & Jikun Huang & Scott Rozelle, 2002. "Emploi, nouveaux marchés du travail, et rôle de l'éducation dans la Chine rurale," Revue d’économie du développement, De Boeck Université, vol. 10(3), pages 191-212.

    More about this item


    Return to education; China; Rural industrial sector;

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials


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