Determinants of schooling returns during transition: Evidence from Chinese cities

This paper uses 1988 and 1995 data from a national household survey to study across-region dispersions and changes over time in returns to education for a large number of Chinese cities and to analyze the determinants of schooling returns during economic transition. On average, the estimated rates of return at the city level increased from 3.1 to 5.1% between these two years and the dispersion widened significantly. During the same period, the gender earnings gap increased and the returns to experience and Communist membership rose sharply. Individual cross section and city-level panel data suggest that the presence of foreign and joint-venture firms, market job search channels, and information infrastructure contributed to increased returns to education. However, the size of the state sector constrained schooling returns. (c) 2005 Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.