Estimating returns to education in urban China: Evidence from a natural experiment in schooling reform |
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| Institution: | 1. Jinan University, Institute for Economic and Social Research, China;2. Duke University, Department of Statistical Science, United States;3. Peking University, Guanghua School of Management, China;1. Mercator Research Institute on Global Commons and Climate Change (MCC), EUREF Campus 19, Torgauer Str. 12-15, Berlin 10829, Germany;2. IZA, Bonn, Germany;3. Leibniz Institut für Ost- und Südosteuropaforschung (IOS), Landshuter Str. 4, Regensburg 93047, Germany;4. Department of Economics, University of Bologna, Strada Maggiore 45, Bologna 40125, Italy;5. National Research University Higher School of Economics, Moscow, Russia;1. Department of Economics, College of Economics, Jinan University, Address no. 601, Huangpu Street West, Guangzhou, China;2. Queen Mary University of London, Mile End Road, E1 4NS, London, United Kingdom;1. Asian Development Bank, No. 6 ADB Avenue, Mandaluyong City 1550 Philippines;2. Department of Economics, University of Messina, Piazza Pugliatti 1, 98122 Messina, Italy;1. Wenlan School of Business, Zhongnan University of Economics and Law, Wuhan, China;2. School of Economics and Management, Tsinghua University, Beijing, China |
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| Abstract: | Whereas there is a large literature on estimating returns to education in China, few studies have attempted to address the endogeneity of schooling choices. We explore the arguably exogenous changes in the duration of secondary education as the instrumental variable to identify the causal effect of years of schooling in urban China. The schooling years in most middle schools were reduced from three years to two years during the Cultural Revolution. The Chinese government gradually restored the middle school education years from two years to three years after 1978. An important feature of these policy changes is their large geographic variations. From local gazetteers, we find out the exact years when education years were reduced from three to two and when they were restored from two to three. Using the exogenous variation in schooling reform, we estimate that the returns to education are 12.7% for both monthly wage and disposable income. |
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