Returns to Education in Rural China

Studies of the labour market in China are beginning to come on stream.

The issue of rural wages is a crucial aspect of the Chinese economy and this will directly influence rural-urban migration and wage increases may lead to inflationary pressures.

The results of this paper in Review of Development Economics (decent journal but not Journal of Development Economics standard) by Alan de Brauw and Scott Rozelle are not surprising and explains why wage inflation has not been higher even in the wake of double digit growth spanning a number of years.

The key to this paper is what data they used, how trustworthy the data is and what methodology was employed to obtain their results.

Reconciling the Returns to Education in Off-Farm Wage Employment in Rural China

* Alan de Brauw and Scott Rozelle.

Abstract

Previous studies have found that the returns to education in rural China are far lower than estimates for other developing economies. In this paper, we seek to determine why previous estimates are so low and provide estimates of what we believe are more accurate measures of the returns. Whereas estimates for the early 1990s average 2.3 percent, we find an average return of 6.4 percent. Furthermore, we find even higher returns among younger people, migrants, and for post-primary education. The paper demonstrates that, although part of the difference between our estimate and previous estimates can be attributed to increasing returns during the 1990s, a larger part of the difference is due to the nature of the data and the methodological approaches used by other authors.

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