The purpose of this paper is to estimate the returns to rural schooling in China, addressing both endogeneity in rural individuals’ schooling and self-selection into off-farm work.
This paper exploits geographical proximity to rural secondary schools to create instrumental variables (IV) for individuals’ years of schooling. It addresses both endogenous schooling and self-selection using the two-step procedure developed in Wooldridge (2002, p. 586).
The preferred IV estimate of schooling returns, 7.6 percent, is considerably higher than most previous estimates found in rural China.
This paper is among the few papers that examine returns to rural schooling in China while simultaneously addressing both endogeneity in individuals’ schooling and self-selection into off-farm work. Its findings suggest that rural education in China is potentially able to generate a respectable level of economic returns if policies are designed to provide greater school accessibility to rural individuals.
The authors thank the Editor of the journal and two anonymous reviewers for their helpful comments on earlier versions of this paper. The authors also thank Junfei Bai, Michael Delgado, Qingyun Shen, Xiaohua Yu, Qiran Zhao and participants in the 7th CAER-IFPRI annual conference in Lin’an, China, for their comments. All remaining errors are the authors’.
Chen, Q., Xu, J., Zhao, J. and Zhang, B. (2017), "Endogenous schooling, school proximity and returns to rural schooling in Northwestern China", China Agricultural Economic Review, Vol. 9 No. 2, pp. 270-286. https://doi.org/10.1108/CAER-02-2016-0031
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