Economic returns to schooling in urban China, 1988 to 2001

This study provides estimates of the returns to schooling in urban China over an extended period of economic reforms. We find a dramatic increase in the returns to education, from only 4.0 percent per year of schooling in 1988 to 10.2 percent in 2001. Most of the rise in the returns to education occurred after 1992 and reflected an increase in the wage premium for higher education. The rise is observed within groups defined by sex, work experience, region, and ownership, and is robust to the inclusion of different control variables. The timing and pattern of changing schooling returns suggest that they were influenced strongly by institutional reforms in the labor market that increased the demand for skilled labor. Journal of Comparative Economics 33 (4) (2005) 730-752. Chinese University of Hong Kong, Shatin, NT, Hong Kong; China Center for Economic Research, Peking University, Beijing, China; 238 Lorch Hall, 611 Tappan Street, University of Michigan, Ann Arbor, MI 48109-1220, USA. (c) 2005 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.