Working Paper: NBER ID: w18189
Authors: Hai Fang; Karen N. Eggleston; John A. Rizzo; Scott Rozelle; Richard J. Zeckhauser
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.
Keywords: Education; Compulsory Education Law; China; Returns to Education
JEL Codes: J31; O15; P52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 1986 Compulsory Education Law (I21) | Educational Attainment (I21) |
| 1986 Compulsory Education Law (I21) | Earnings (J31) |
| Educational Attainment (for girls) (I21) | Educational Attainment (for boys) (I21) |
| Educational Attainment (I21) | Earnings (J31) |
| Educational Attainment (for males) (I21) | Earnings (J31) |
| Educational Attainment (for females) (I21) | Earnings (J31) |