Reconciling Returns to Education in Off-Farm Wage Employment among Women in Rural China

Previous studies have found that returns to education in off-farm wage employment in rural China are lower than estimates for other developing economies. This paper seek to understand why and to provide what we believe are more accurate estimates of the returns. The returns to education in rural China may have been systematically underestimated due to mismeasurements in wage rate and/or experiences. Using a nearly nationally representative dataset of female workers in rural China, with detailed information on hours worked and earnings (to calculate daily wage rate), and employment history (to more appropriately measure experiences), might help provide better estimates of returns to education. We find that estimates of returns to education, when employment interruptions are considered, are 3-4% higher than those without being considered. Moreover, we also find that mismeasurement in wage rate by not considering the hours worked cause even more serious underestimate of returns to education (by 25-43%). The paper demonstrates that, although some of the differences between our estimates and previous ones can be attributed to increasing returns since the 2000s, a larger portion of the differences are due to the nature of the data and the methodological approaches used by other authors. Acknowledgement : The authors acknowledge the financial support of the National Natural Science Foundation of China (Grant Numbers 71473240 and 71333012)