Understanding Trends in Chinese Skill Premiums, 2007-2018

Abstract

The dramatic expansion of the education system and the transformation of the economy in China provide an opportunity to investigate how the labor market rewards skills. Between 2007 and 2018, the overall return to cognitive skills is virtually constant at 10%, whereas the college premium drops steeply by more than 20 percentage points. But, the regional differences in returns are significant and highlight the importance of differential demand factors. College returns are higher in more developed regions, but the declining trend is more pronounced. Returns to cognitive skills increase in more developed regions and decrease in less developed regions.

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