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Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

Postal Subscription Code 80-978

Front. Econ. China    2017, Vol. 12 Issue (1) : 113-131    https://doi.org/10.3868/s060-006-017-0006-4
Orginal Article |
Improving the Accuracy of Estimated Returns to Education in China—Based on Employment Rate, Career Length, and Income Growth
Binlei Gong()
Department of Agricultural Economics and Management, China Academy for Rural Development (CARD), Zhejiang University, Hangzhou 310058, China
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Abstract

Most empirical studies on the returns to education use current income to proxy for lifetime income due to the lack of longitudinal data. This simplification is found to cause biased estimates and the result is conditional on being employed. This paper quantifies the returns to education with heterogeneity in employment rates, career lengths, and income growth rates. Using data from China, this paper attempts to account for these differences across the life-cycle and estimates the returns to education in terms of lifetime income when actual lifetime earnings data are not available. The model clarifies the mathematical relationship between conditional current returns to education, unconditional current returns to education, and unconditional lifetime returns to education. This new approach explains how employment rates, career lengths, and income growth rates affect the direction and magnitude of the bias in estimating the returns to education.

Keywords current and lifetime income      returns to education      urban-rural disparity      labor migration in China     
Issue Date: 27 April 2017
 Cite this article:   
Binlei Gong. Improving the Accuracy of Estimated Returns to Education in China—Based on Employment Rate, Career Length, and Income Growth[J]. Front. Econ. China, 2017, 12(1): 113-131.
 URL:  
http://academic.hep.com.cn/fec/EN/10.3868/s060-006-017-0006-4
http://academic.hep.com.cn/fec/EN/Y2017/V12/I1/113
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[2] ZHAO Hongjun, YIN Bocheng. On transaction efficiency and China’s Urban-Rural disparity[J]. Front. Econ. China, 2006, 1(4): 597-614.
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