Xiaolan Fu: This paper examines external returns to education in China using household survey data from the China Health and Nutrition Survey. It finds positive returns of about 10 to 14 percent, especially for rural, male, and poorly educated workers,whereas returns for urban, female, and highly educated workers were negligible. The paper argues that China should increase public investment in education and target it more at rural areas and poorly educated workers.
Human capital is crucial for long-term economic growth. Education is the major measure for enhancing the skills and quality of labor. Although industry policy is often argued to be the main factor driving the East Asia Miracle in Japan and South Korea, research also finds that heavy investment in education, which started two to three decades before the rapid growth of these economies, in fact laid the most important foundation for the later fast economic growth and catch-up....