Return To Education And Its Influencing Factors

Education is the most important type of investment in human capital and also an important force to promote the development of social politics, economy and culture. In order to ensure continuous investment in education, returns to present education must be guaranteed. The study on rate of return to education (RRE) is of great significance, since it can not only measure the contribution of education to the development of the economy and the efficiency of the resources, but also reveal the influence of education on income distribution and the efficiency of labour disposition. The determination of RRE is a complex procedure, and making this procedure clear will bring about constructive proposals to heighten RRE, to improve the efficiency of the economy, and ultimately to realize the stable and sound development of the whole economy and the society.This dissertation is mainly a positive study. On the basis of reviewing the present literature on RRE, introducing the model and setting the variables, this dissertation estimates the personal Mincerian RRE in China, with OLS method and the Eviews 5.0 software. Not only the average RRE and the rates of return to different stages of education are estimated, but also the differences in RRE between the urban and the rural areas, different genders and different cohorts are studied. Factors influencing RRE and the internal mechanism are paid special attention to. Those factors are divided into two hierarchies, the direct ones and the indirect ones, and when analyzing the mechanism of these factors, especially the indirect factors, influencing RRE, the fundamental reasons are found.The main results of this positive study with respect to RRE in China include: (1) the RRE estimated with classical Mincerian model is high, while the true RRE estimated with full model is lower than the average RRE of developing countries when estimated with full model (the true RRE); (2)with the increase of schooling, the true RRE decreases and then increases; (3)the RRE of the urban area is higher than that of the rural area; with the increase of schooling, the RRE of the urban area is monotone increasing while that of the rural area is monotone decreasing; (4)the gender difference in RRE is significant, and the RRE for female workers is higher in urban area, while that for male workers is higher in rural area; as for urban male and female workers, the higher the education stage is, the higher the RRE will be, and for rural male and female workers, the RRE is U-shaped respectively; (5)the RRE for each cohort is U-shaped with the increase of schooling; the RRE for younger urban cohort is higher, while that for 30-39 rural cohort is higher than that for other cohorts.The direct factors determining the RRE are employment related variables, including type of employment, area type of employment, occupation, industry, ownership of the factory, professional rank and administrative rank. By controlling different variables on the basis of classical Mincerian equation, this dissertation finds that employment related factors have great influence on RRE, especially on rate of return to secondary education. Among these variables, the influence of the type of employment is the greatest. Yet these variables are closely related to each other, and simply studying the effect of one single variable will bring about overestimation. Dividing these variables into 3 types, including employment-choice variables, employment-status variables and rank variables, the study finds that employment-choice variables have the greatest influence.82.37 percent of the difference in the RRE for the urban and rural areas is caused by employment related factors, which have greater influence on the RRE for the urban area. In urban area, the employment related factors have greater impact on female workers, while in rural area, they have greater impact on male workers. Among the four cohorts, the RRE for the youngest one is affected the most. The employment related factors have more effect on the RRE for the urban older cohort and for the rural younger cohort.The indirect factors include residence, gender, age, political status, migration, family background, area and so on. These factors affect RRE by working on the direct factors, and the root is the social environment factors, such as economic development, the growth of the market, social system, social culture and micro-environment.The most important cause of the difference in RRE for the urban and rural area is the urban-rural segregation, which is mainly shown by the difference in the distribution of industries. The RRE for urban female workers is higher than male workers because the effect of born gender difference, gender discrimination and social gender division of labor to urban female workers decreases with the increase of education; while the RRE for rural female workers is lower than male workers because the rural female workers suffer from gender discrimination both in human capital investment and in labor market.The difference in the RRE for different cohorts in urban and rural areas is different, and the main reasons lie in the educational structure of different cohorts, the difference in the mode of production between the urban and rural areas, and the marketization of China.The benefits brought about by education in China are characterized by the improvement in employment status, which shed light on the fact that many Chinese people have much zest in educational investment regardless of the low RRE. As a whole, when the cost is certain, the prerequisite of the maximization of benefits is to ensure that the marginal benefits of different groups and different educational stages are the same. The great difference in RRE actually reveals that the efficiency of education investment is low in China, and there are factors hindering the convergence of RRE. These factors affect not only RRE, but also the productivity, the efficiency and thus the development of the whole economy. Corresponding measures must be taken to reduce the difference in RRE caused by the disequilibrium of economic development, the immaturity of the market, the deficiency of the social system and the social inequities.