Parental human capital and returns to education: The divide between urban residents and migrants in China

This paper uses data from the 2002 Chinese Household Income Project (CHIP) to test three main hypotheses: (1) that parental human capital has a positive impact on the returns to education for both urban and migrant workers in Chinese cities, (2) that there is a gap in returns to education between these two groups which productivity related characteristics cannot fully explain, and (3) that parental human capital has a stronger impact on migrant workers. In this study, we also decompose the wage differentials between urban residents, migrant workers with an urban Hukou, and migrant workers with a rural Hukou. The empirical results show that parental education has a positive impact on wages, that urban workers have higher returns to own education, and that this wage gap between urban and migrant workers is most likely due to institutional- instead of social- discrimination against migrants