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Estimating the External Returns to Education: Evidence from China

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  • Wen Fan
  • Yuanyuan Ma

Abstract

Good understanding on the human capital externalities is important for both policy makers and social science researchers. Economists have speculated for at least a century that the social returns to education may exceed the private returns. In this paper, using the longitudinal data from China Health and Nutrition Survey (CHNS), we examine how individual wage changes associated with the share of college graduates in the same province across years for a person who has never moved by implementing individual fixed effects estimates. The individual fixed effect model shows that the external returns to education in China appear to be negative and on the order of -2%, which might be biased by potential endogeneity. Concerned with this problem, we then implement the IV fixed effect estimates and find positive external returns to education at about 10%. We also find this returns differ across individual heterogeneity.

Suggested Citation

  • Wen Fan & Yuanyuan Ma, 2012. "Estimating the External Returns to Education: Evidence from China," Working Papers 201220, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:201220
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    File URL: http://hdl.handle.net/10197/3826
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    References listed on IDEAS

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    1. repec:bla:obuest:v:79:y:2017:i:6:p:1046-1086 is not listed on IDEAS
    2. Abdurrahman Aydemir & Murat G. Kirdar, 2017. "Low Wage Returns to Schooling in a Developing Country: Evidence from a Major Policy Reform in Turkey," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(6), pages 1046-1086, December.
    3. Ragui Assaad & Abdurrahman Aydemir & Meltem Dayioglu & Guray Kirdar, 2016. "Returns to Schooling in Egypt," Working Papers 1000, Economic Research Forum, revised May 2016.

    More about this item

    Keywords

    Education; Externalities; Spillover; Signalling; China; Wages--College graduates--China; Wages--Effect of education on--China; Externalities (Economics); Education--Social aspects--China;

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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