Does a foreign degree pay? The return to foreign education in China

A large body of literature is devoted to estimating causal effects of schooling; however, few studies have addressed the returns on education overseas. In this paper, we focus on the causal impact of holding a foreign education degree on one's performance in the homeland labor market in the context of China, the world's leading source of students pursuing education overseas. To address the issue of endogeneity, we construct an instrumental variable based on the exchange rate when the individual is about to make further education plans to isolate the arguably exogenous cost‐side shocks to one's education decision. Utilizing data from the China Household Financial Survey, we find that holding a foreign education degree has no effect on one's propensity to join the labor market but leads to a 108.95% increase in one's wage upon employment. Moreover, such effects display significant heterogeneity among returnees regarding their background. Specifically, returnees earn less if they went abroad after China joined the WTO, work in public sectors or have rich family resources.     

Is wealth found in the soil or in the brain? Investing in farm people in Malawi

Should a typical developing country invest more in agriculture or education? At what stage of development is it optimal to invest more in each of these sectors? These are important questions that governments of developing countries grapple with when designing investment plans. In this paper, I propose a soil–human capital conceptual framework of development and use it to explain estimates of agricultural returns to schooling in Malawi. I use panel survey data for Malawi and rely on the exogenous education policy changes and spatial variation in access to schooling to identify effects of schooling on agricultural incomes. In addition, I correct for selection into income activities within a panel data and instrumental variables estimation framework. I find annual agricultural returns to schooling in Malawi of 3%–4% after correcting for selection and unobserved heterogeneity and 7% in the uncorrected specifications. I also find consistently higher returns to schooling in the nonagricultural sector for those not living in the village of birth and higher returns in the agricultural sector for those living in the village of birth. Given the size of the farm sector, wealth in Malawi is still in the soil, but that future growth in wealth depends on human capital investments.     

选择偏差、比较优势与教育的异质性回报∶基于中国微观数据的实证研究

本文根据 2 0 0 0年中国的微观数据 ,运用现代微观计量经济学的分析方法 ,在考虑异质性和选择偏差的基础上 ,估计了 2 0世纪末中国的教育回报。研究结果表明 :与受教育水平相关的收益在人们中间存在显著的异质性 ;在当今中国的劳动力市场上存在一种重要的实证现象 ,即人们根据比较优势原理对教育水平进行选择。传统的普通最小二乘法以及工具变量法都难以对这种选择做出合理的估计 ,我们的分析框架弥补了上述两种方法的缺陷。 2 0 0 0年中国 6个省区城镇青年大学教育的平均回报率为 43 % (年均近 1 1 % )。中国在经历二十多年的市场经济改革后 ,较之 80年代及 90年代初期 ,教育的平均回报有了显著提高 ,中国的教育和劳动力市场已经开始发挥重要作用。     

Africa's education enigma? The Nigerian story

In the last two decades, the social and economic benefits of formal education in Sub-Saharan Africa have been debated. Anecdotal evidence points to low returns to education in Africa. Unfortunately, there is limited econometric evidence to support these claims at the micro level. In this study, I focus on Nigeria, a country that holds 1/5 of Africa's population. I use instruments based on the exogenous timing of the implementation and withdrawal of free primary education across regions in this country to consistently estimate the returns to education in the late 1990s. The results show the average returns to education are particularly low in the 90s, in contrast to conventional wisdom for developing countries (2.8% for every extra year of schooling between 1997 and 1999). Surprisingly, I find no significant differences between OLS and IV estimates of returns to education when necessary controls are included in the wage equation. The low returns to education results shed new light on both the changes in demand for education in Nigeria and the increased emigration rates from African countries that characterized the 90s.     

Estimating returns to education using twins in urban China

This paper empirically estimates the return to education using twins data that the authors collected from urban China. Our ordinary least-squares estimate shows that one year of schooling increases an individual's earnings by 8.4%. If we use a within-twin fixed effects model, the return is reduced to 2.7%, but rises to 3.8% after the correction of measurement error. These results suggest that a large portion of the estimated returns to education is due to omitted ability or the family effect. We further investigate why the true return is low and the omitted ability bias high, and find evidence showing that it may be a consequence of China's education system, which is highly selective and exam oriented. More specifically, we find that high school education may mainly serve as a mechanism to select college students, but as a human capital investment per se it has low returns in terms of earnings. In contrast, both vocational school education and college education have a large return that is comparable to that found in the United States.     

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.     

Income inequality and education revisited: persistence,endogeneity and heterogeneity

This article presents new results on the relationship between income inequality and education expansion – that is, increasing average years of schooling and reducing inequality of schooling. When dynamic panel estimation techniques are used to address issues of persistence and endogeneity, we find a large, positive, statistically significant and stable relationship between inequality of schooling and income inequality, especially in emerging and developing economies and among older-age cohorts. The relationship between income inequality and average years of schooling is positive, consistent with constant or increasing returns to additional years of schooling. While this positive relationship is small and not always statistically significant, we find a statistically significant negative relationship with years of schooling of younger cohorts. Statistical tests indicate that our dynamic estimators are consistent and that our identifying instruments are valid. Policy simulations suggest that education expansion will continue to be inequality reducing. This role will diminish as countries develop, but it could be enhanced through a stronger focus on reducing inequality in the quality of education.     

Individual heterogeneity in the returns to schooling: instrumental variables quantile regression using twins data

Considerable effort has been exercised in estimating mean returns to education while carefully considering biases arising from unmeasured ability and measurement error. Recent work has investigated whether there are variations from the “mean” return to education across the population with mixed results. We use an instrumental variables estimator for quantile regression on a sample of twins to estimate an entire family of returns to education at different quantiles of the conditional distribution of wages while addressing simultaneity and measurement error biases. We test whether there is individual heterogeneity in returns to education and find that: more able individuals obtain more schooling perhaps due to lower marginal costs and/or higher marginal benefits of schooling and that higher ability individuals (those further to the right in the conditional distribution of wages) have higher returns to schooling consistent with a non-trivial interaction between schooling and unobserved abilities in the generation of earnings. The estimated returns are never lower than 9 percent and can be as high as 13 percent at the top of the conditional distribution of wages but they vary significantly only along the lower to middle quantiles. Our findings may have meaningful implications for the design of educational policies.     

The marginal and average returns to schooling in the UK

We explore the possibility that different instruments may affect different margins of the schooling distribution, and consistent with recent evidence we find a large, significant downward bias in the least squares estimate of the returns to schooling and that the estimates are stable with respect to the choice of instruments. However when we remove the assumption that log wages are linear in years of schooling we find sensitivity to the choice of instrument.     

What factors drive individual misperceptions of the returns to schooling in Tanzania? Some lessons for education policy

Evidence on educational returns and the factors that determine the demand for schooling in developing countries is extremely scarce. Building on previous studies that show individuals underestimating the returns to schooling, we use two surveys from Tanzania to estimate both the actual and perceived schooling returns and subsequently examine what factors drive individual misperceptions regarding actual returns. Using OLS and instrumental variable methods, we find that each additional year of schooling in Tanzania increases earnings, on average, by 9 to 11%. We find that on average individuals underestimate returns to schooling by 74 to 79% and three factors are associated with these misperceptions: income, asset, poverty and educational attainment. Shedding light on what factors relate to individual beliefs about educational returns can inform policy on how to structure effective interventions in order to correct individual misperceptions.     

Returns to schooling for urban and migrant workers in China: a detailed investigation

We use a new data set, the 2009 Rural Urban Migration in China (RUMiC) to estimate returns to schooling in China using instrumental variable (IV) estimation. After identifying a set of instruments, we conduct comprehensive validity and relevance testing of different combinations of instruments as well as robustness analysis of our estimates for rural-to-urban migrants and urban residents in China. We find that our point estimates are in the 6–9% range for urban workers compared to 7–8% for migrant workers. Returns for men (at 8–9%) are slightly higher than for women (at 6–7%). Thus, private returns to education in urban China in 2009 were not as high as other transition and developing countries, but substantial and have increased over time. Comparing OLS and IV estimates, we also find that the attenuation bias due to measurement error is generally large and more important in the migrant sample compared to the urban sample.     

Returns to schooling in Kazakhstan

This paper examines rates of return to schooling in Kazakhstan using OLS (Ordinary Least Squares) and instrumental variable (IV) methodologies. We use spouse's education and smoking as instruments. We find that spouse's education is a valid instrument and that conventional OLS estimates that assume the exogenous nature of schooling, and hence do not control for endogeneity bias, may underestimate the true rates of return. The results indicate that the returns to schooling in Kazakhstan have increased with transition. This may reflect the relative scarcities of highly educated people in Kazakhstan with human capital that employers require and, following the market reforms, reward accordingly.     

中国城乡教育收益率差异与收入差距

本文利用CHNS数据,研究了历次调查年份分城乡和性别的教育收益率的动态变化。研究发现,分城乡和性别的教育收益率都基本呈现逐年递增的趋势,但城镇的教育收益率总是高于农村,而无论是城镇还是农村,女性的教育收益率都高于男性。从动态变化来看,自2000年以来城乡教育收益率的差异逐年加大,其中主要是城乡男性劳动力的教育收益率差距增大。本文的研究表明,除教育水平本身的差异以外,教育收益率差异的扩大也是引起城乡收入差距加剧的重要原因。     

基于户籍制度的教育回报差异:对工资歧视的再考察

利用2005年全国1%人口抽样调查数据,分析了我国东南部十一个省份就业者基于户籍制度的收入差异。户口类型对于工资的影响可以被不同户口类型人群的教育回报差距所解释。不同户口类型人群间教育回报的差距随着教育年限的下降而显著扩大。这一结果支持了在解释基于户籍制度的工资歧视的合理性方面信息经济学的有关理论。我国城乡间义务教育水平的差距引起了基于户籍制度的教育回报差异,进而导致了基于户籍类型的工资歧视。     

The economics of education and policy: Ideas for a principles course

There are many aspects of the “economics of education” that would make excellent examples for introductory economics students. The author presents two topics that are central to the economics of education and to human capital theory: the economic benefit (or “returns”) to schooling and educational attainment as an investment. There are two key concepts the author hopes students get from this discussion. The first is that there are both private and social benefits of schooling whence we derive the rationale for government intervention. The second is that educational attainment is an investment decision with both costs and benefits, and some risk.     

The gender difference in wages and the returns to schooling over the great recession in the U.S.

This paper examines the effects of the Great Recession on the gender difference in hourly wage and the rate of return to schooling in the United States. Using data from American Community Survey 2000–2015, we find that the male-female difference in hourly wage declined during and after the recession. The Great Recession decreased earnings for both men and women, especially for those with more education. We also find there is a significant gender difference in the effects of the Great Recession on the returns to schooling. The Great Recession increased the rate of return to schooling for both men and women, and the female-male difference in the returns to schooling decreased by 0.4 percentage points in the post-recession period. The change of the gender difference in the returns to schooling can be explained by the wage structure change for men and women over the recession.     

Heterogeneity in the economic returns to schooling among Chinese rural–urban migrants, 2002–07

This paper analyses the returns to schooling among Chinese rural migrants using data from the 2002 and 2007 China Household Income Project. Our non‐parametric estimates show substantial heterogeneity in the schooling rates of return among migrant workers. While the returns to schooling for the overall sample have increased over time, this result is driven by the substantial increases in the schooling coefficients of female migrants. We expect the endogeneity biases in the estimated schooling returns to be decreasing after considering the change in the ability distribution of migrant workers during 2002–07.     

Social learning,neighborhood effects,and investment in human capital: Evidence from Green-Revolution India

This paper empirically identifies social learning and neighborhood effects in schooling investments in a new technology regime. Social learning implies that learning is most efficient when observed heterogeneity in schooling is greatest. The estimates of learning-investment rule, from farm household panel data at the onset of the Green Revolution in India, show that (i) agents learn about schooling returns from income realizations of their neighbors, and (ii) the speed of learning is high when the variation of schooling is large. Thus, schooling distribution of the parents' generation in a community has externalities to schooling investments in children. Simulations show that the variations in schooling within and across communities generate variations in child enrollment rate and average household income.     

Child labor and schooling responses to anticipated income in South Africa

Forward looking, unconstrained households make child labor and schooling decisions considering their permanent income and weighing the relative returns to child time in various potential activities. The timing of anticipated changes in income should have no effect on child labor and schooling in a setting where households can borrow against permanent income. However, this study documents large increases in schooling attendance and declines in total hours worked when black South African families become eligible for fully anticipatable social pension income. As an explanation, the data are most consistent with liquidity constraints for black elder males forcing rural families into less schooling for boys than they would choose absent the constraint, perhaps because of schooling costs.     

The effects of education in early-stage agriculture: some evidence from China

The stochastic production frontier approach is used to study the effects of education on agricultural efficiency for a cross-section of 'early-stage' farms from Guanghan County, Sichuan Province, China. Education for farm families in rural China is multifaceted with a combination of formal education, intragenerational transfer of knowledge within the home, and agricultural extension services. Since our survey data span two different years with markedly different policy environments, we are able to examine not only which aspects of education affect agricultural efficiency, but also whether or not the policy environment matters. We find limited evidence that in a policy environment that is conducive to agriculture, formal education provides positive returns in agriculture. Furthermore, general education may provide greater returns than the more targeted extension services.