Education inside China: a longitudinal (1989-2011) analysis

Purpose - This paper aims to analyze the rates of returns on education in China and in the process raises issues relevant to the management of China's system of education. In the ongoing great transformation period of China, the rising rates of returns on education may have been indicators reflecting China's social progressiveness. However, very little research efforts have been devoted to the study of the impacts of such factors as geographical regions and genders, etc. The authors hope to fill these gaps in the literature. Design/methodology/approach - The China Health and Nutrition Survey (CHNS) database is used for this study (University of North Carolina). The longitudinal nature of the data sets covering 1989, 1991, 1993, 1997, 2000, 2004, 2006, 2009 and 2011 provides a good basis for comparative analyses. The theory is grounded upon the Mincer equations through which econometric estimates are then made. Findings - Disparities in returns on education are found between genders and across geographical regions. The regression results show that the women's returns on education are consistently higher than those of men. However, the scales of such gender differences differ between the rural and urban areas: smaller for rural area and larger, more significantly so for urban. Additionally, we have found that the rates of returns on education in China have risen significantly over these years, and these increases have been largely due to the effects of institutional reforms. The urban-rural gap in their degrees of market orientation has contributed to the differences in their rates of returns on education. The analyses also suggest that foreign direct investment inflows, international trade and the increasing competitiveness from private enterprises render human capital more valuable to urban businesses. In case of the rural areas, a lack of incentive system tends to have contributed to the lower rates of returns on education. Originality/value - The authors have presented evidence on the trends in the rates of returns on education during China's critical transition period. Analyses of the possible reasons behind the differential rates of returns are provided. These findings are helpful for the government to shape their policies towards education. For instance, the government should give more emphasis to vocational schooling due to their significantly higher rates of returns.