Fung Kwan: With the micro-level data of income and other educational indicators, this paper examines the returns to higher education in China. At the full sample level, fixed-effect estimates show no returns to education. After adjusting the endogeneity problem, the returns become around 10 percent. At the individual level, this study finds the returns to education are small for urban, female, and highly educated workers; but significantly positive for those living in the countryside, male, and low-educated workers.
The research issue of this paper is important to developing public policy on investment in education in China. Income and wealth inequalities are likely improved with more education investment in the rural area. Nevertheless, more university graduates have recently found difficulty in finding jobs, giving rise to the concern of educated unemployment in the rapidly developing Chinese economy. This phenomenon is fundamentally correlated to the structural rigidity of China's labor and product...