Reconciling Rates of Return to Education in Rural China

Previous studies have found that the returns to education in rural China are far lower than estimates for market economies. In this paper, we try to determine why previous estimates are so low. Whereas estimates for the early 1990s average 2.3 percent, we find an average return of 6.4 percent. Furthermore, we find even higher returns among younger people, migrants, and for post-primary education. We further show that although part of the difference between our estimate and previous estimates can be attributed to increasing returns over time, a larger portion of the difference is due to the methodology used by other authors.