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Rates of Return to Four‐Year University Education: An Application of Regression Discontinuity Design

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  • Elliott Fan
  • Xin Meng
  • Zhichao Wei
  • Guochang Zhao

Abstract

It is invariably difficult to estimate the rate of return to university education, because of the problem of omitted variable bias. Using a regression discontinuity design, we estimate the effect of a four‐year university education on earnings, and we explore the pathways through which the effect operates. Our estimation exploits the centralized, score‐based college/university admission system in China, where the minimum scores required for university admission are externally determined by the provincial governments. Our findings suggest that being eligible for four‐year university admission implies a sizable increase in earnings. The payoff can be attributed to the prolonged length of education and improvements in education quality, although the quality effects cannot be precisely estimated.

Suggested Citation

  • Elliott Fan & Xin Meng & Zhichao Wei & Guochang Zhao, 2018. "Rates of Return to Four‐Year University Education: An Application of Regression Discontinuity Design," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(4), pages 1011-1042, October.
    • Handle: RePEc:bla:scandj:v:120:y:2018:i:4:p:1011-1042
    DOI: 10.1111/sjoe.12251
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    Cited by:

    1. Meng, Xin & Zhao, Guochang, 2021. "The long shadow of a large scale education interruption: The intergenerational effect," Labour Economics, Elsevier, vol. 71(C).
    2. Georg Graetz & Oskar Nordström Skans & Björn Öckert, 2020. "Family background and the responses to higher SAT scores," CEP Discussion Papers dp1698, Centre for Economic Performance, LSE.
    3. Bollinger, Christopher & Ding, Xiaozhou & Lugauer, Steven, 2022. "The expansion of higher education and household saving in China," China Economic Review, Elsevier, vol. 71(C).
    4. Ding, Xiaozhou, 2021. "College education and internal migration in China," China Economic Review, Elsevier, vol. 69(C).

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