Returns to education under collective and household farming in China

This paper presents a theoretical model and shows that greater distributional equality decreases individuals' returns to education. The evidence from a production team in 1977 and the rural household farming in 1990, both in China, lends support for the model. Production team did not reward most members' (especially for those with higher work points such as the married and males) education during most of their lifetimes in distributing work points and labor income. However, under the household farming system, a household's average or highest educational level increased its net agricultural income and total efficiency labor for all households at any average/highest educational and age levels. Thus our findings support the idea that reaping returns from schooling investments requires appropriate economic/political environments. (C) 1998 Elsevier Science B.V. All rights reserved.