Explaining Rising Returns to Education in Urban China in the 1990s

43 Pages Posted: 12 Apr 2010

See all articles by Xuejun Liu

Xuejun Liu

affiliation not provided to SSRN

Albert Park

University of Oxford

Yaohui Zhao

Peking University

Abstract

Although theory predicts that international trade will decrease the relative demand for skilled workers in relatively skill-deficit countries, in recent decades many developing countries have experienced rising wage premiums for skilled workers. We examines this puzzle by quantifying the relative importance of different supply and demand factors in explaining the rapid increase in the returns to education experienced by China during the 1990s. Analyzing Chinese urban household survey and census data for six provinces, we find that although changes in the structure of demand did reduce the demand for skilled workers, consistent with trade theory, the magnitude of the effect was modest and more than offset by institutional reforms and technological changes that increased the relative demand for skill.

Keywords: education, earnings, inequality, China

JEL Classification: F16, J24, J31, P23

Suggested Citation

Liu, Xuejun and Park, Albert and Zhao, Yaohui, Explaining Rising Returns to Education in Urban China in the 1990s. IZA Discussion Paper No. 4872. Available at SSRN: https://ssrn.com/abstract=1587565

Xuejun Liu (Contact Author)

affiliation not provided to SSRN ( email )

No Address Available

Albert Park

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Yaohui Zhao

Peking University ( email )

Department of Economics
Beijing 100871
China

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