The Returns to Education in China: Evidence from the 1986 Compulsory Education Law

Hai Fang, Karen Eggleston, John Rizzo, Scott Rozelle and Richard Zeckhauser

No 18189, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: As China transforms from a socialist planned economy to a market-oriented economy, its returns to education are expected to rise to meet those found in middle-income established market economies. This study employs a plausible instrument for education: the China Compulsory Education Law of 1986. We use differences among provinces in the dates of effective implementation of the compulsory education law to show that the law raised overall educational attainment in China by about 0.8 years of schooling. We then use this instrumental variable to control for the endogeneity of education and estimate the returns to an additional year of schooling in 1997-2006. Results imply that the overall returns to education are approximately 20 percent per year on average in contemporary China, fairly consistent with returns found in most industrialized economies. Returns differ among subpopulations; they increase after controlling for endogeneity of education.

JEL-codes: J31 O15 P52 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-dev, nep-edu, nep-lab, nep-lma and nep-tra
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Citations: View citations in EconPapers (69)

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