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Do We Need More Public Investment in Higher Education? Estimating the External Returns to Higher Education in China

Author

Listed:
  • Wen Fan

    (School of Public Administration Institute of Urban Development Studies and Centre for Governmental Studies Nanjing University of Finance and Economics)

  • Yuanyuan Ma

    (The Irish Longitudinal Study on Ageing (TILDA) Lincoln Gate Trinity College Dublin Dublin)

  • Liming Wang

    (School of Economics and Management Beijing University of Technology and Irish Institute for Chinese Studies University College Dublin Belfield)

Abstract

Despite its significance in policymaking and theory, empirical work on external returns to education has not been fruitful, and most studies focus on developed countries. This paper discusses external returns to education in China, an important developing economy. Using longitudinal data from the China Health and Nutrition Survey, we estimate a fixed-effects instrumental variables model and find positive returns of about 10 to 14 percent. Negligible returns are found for urban, female, and highly educated workers, and returns are positive and statistically significant for rural, male, and poorly educated workers. This suggests that China should increase public investment in education and target rural areas and poorly educated workers. Gender differences in the external returns to education may also imply that China should make more efforts to enhance the capacity of “networking” and competitiveness for women.

Suggested Citation

  • Wen Fan & Yuanyuan Ma & Liming Wang, 2015. "Do We Need More Public Investment in Higher Education? Estimating the External Returns to Higher Education in China," Asian Economic Papers, MIT Press, vol. 14(3), pages 88-104, Fall.
    • Handle: RePEc:tpr:asiaec:v:14:y:2015:i:3:p:88-104
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    Cited by:

    1. Cui, Ying & Martins, Pedro S., 2021. "What drives social returns to education? A meta-analysis," World Development, Elsevier, vol. 148(C).
    2. Ding Lu, 2017. "China's Growth Slowdown and Prospects for Becoming a High-Income Developed Economy," Asian Economic Papers, MIT Press, vol. 16(1), pages 89-113, Winter/Sp.
    3. Shi Li & ShanshanWu & Chunbing Xing, 2018. "Education Development and Wage Inequality in Urban China," Asian Economic Papers, MIT Press, vol. 17(2), pages 140-151, Summer.
    4. Wai Choi Lee & Tsun Se Cheong & Yanrui Wu & Jianxin Wu, 2019. "The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach," Asian Economic Papers, MIT Press, vol. 18(2), pages 126-141, Summer.
    5. Yuanyuan Ma & Patrick Paul Walsh & Liming Wang, 2017. "Earnings Premium in State Jobs Across Urban China," Asian Economic Papers, MIT Press, vol. 16(2), pages 167-184, Summer.
    6. Yong-Ming He & Yu-Long Pei & Bin Ran & Jia Kang & Yu-Ting Song, 2020. "Analysis on the Higher Education Sustainability in China Based on the Comparison between Universities in China and America," Sustainability, MDPI, vol. 12(2), pages 1-19, January.
    7. Lijia Guo & Jiashun Huang & You Zhang, 2019. "Education Development in China: Education Return, Quality, and Equity," Sustainability, MDPI, vol. 11(13), pages 1-20, July.
    8. Yuanyuan Ma, 2017. "Civic Returns to Education: Voter Turnout in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 48(2), pages 145-169.

    More about this item

    Keywords

    China; education;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • J1 - Labor and Demographic Economics - - Demographic Economics

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