Labor Market Returns to Education and English Language Skills in the People's Republic of China: An Update

Abstract

We reexamine the economic returns to education in the People's Republic of China (PRC) using data from the Chinese General Social Survey 2010. We find that the conventional ordinary least squares estimate of wage returns to schooling is 7.8%, while the instrumental variable estimate is 20.9%. The gains from schooling rise sharply with higher levels of education. The estimated returns are 12.2% in urban provinces and 10.7% in coastal provinces, higher than in rural and inland areas. In addition, the wage premium for workers with good English skills (speaking and listening) is 30%. These results are robust to controls for height, body mass index, and English language skills, and to corrections for sample selection bias. Our findings, together with a critical review of existing studies, confirm the growing significance of human capital as a determinant of labor market performance in postreform PRC.

Second‐language acquisition behavior and hegemonic language

“…Gazzola and Mazzacani (2019) show that English language skills increase the probability of being employed for men in Germany, Italy and Spain and women in Germany and Italy, although French language skills have no significant impact. Asadullah and Xiao (2019) show that English language skills bring a wage premium in China. Foreman-Peck and Zhou (2015) study small and medium-size exporting firms in Europe and show the lack of investment in language skills in English native speaking countries.…”

Income difference between highly educated migrants and highly educated local‐born workers in urban China

“…At the same time, they are more ready to move elsewhere. To retain such individuals, and to avoid high employee turnover rates that lead to unstable working arrangements, loss of valuable experiences, and difficulty in replacing highly educated migrants who have foreign language skills, employers are more likely to pay higher wages (Asadullah & Xiao, 2019). Therefore, we hypothesize that,H2 Highly educated migrants without local hukou who know a foreign language have the highest returns on their human capital in comparison to migrants with local hukou and local‐born workers who know a foreign language.…”

The hukou system and selective internal migration in China

“…Accordingly, this paper mainly discusses two scenarios representing China's typical migration patterns: inland-coastal migration (scenario 1) and coastal-inland migration (scenario 2). In the meantime, scholars have also identified that coastal developed regions have a higher skill premium of wage (or return to skills) than inland regions (Asadullah & Xiao, 2019Whalley & Xing, 2014;Zou et al, 2009). Therefore, we can assume that return to skills (η) in coastal regions is higher than that in inland regions.…”