The Education Treatment Effect On The Income Of Chinese Western Rural Residents

Education plays an important role in improving Chinese rural laborers’incomes. However, in Chinese western rural area, the level of return to education is very low due to the underdeveloped economy and the condition of the education system. For improving the schooling returns level, Chinese central government is paying great attention to the condition of education in the rural western area. To date, no research has examined what educational style is more favorable for improving western rural laborers’non-farm incomes. Studies concerning the causal relationship between schooling (highschool education and secondary vocational education) and non-farm earnings in the western region of China remain very limited, even empty. This paper will make an update contribution to the literature in the area of education earnings in China. To answer this question, this paper follows the mentality of "education-employment action-income improvement-income distribution-policy simulation", bases on the large sample data from western rural area survey, employs several econometrics methods, analyzed the education effect on the income of Chinese western rural residents and simulates the effect of education spread policy. The results of the research show that, firstly, education affects not only the probability of the rural labors joining the non-farm jobs but also influences their decisions about which region and vocation to join in. That indicates the education could influence the western rural residents’ income indirectly by affecting their employment action. Secondly, by employing Heckman two-steps method to estimate the farming income model. The results show that the education return to farming gross income is1.3%, and the education return to farming net income is1.8%. The education return to farming productive efficience is5%. Thirdly, base on the Mincer model, several methods is used to estimate the average return to a year education on western rural labors’non-farm income, including OLS, IV and Heckman tow-steps method, to accounting for the the ability endogenous and self-selection bias. And the propensity score matching method is used in estimate the treatment effects of highschool education and secondary vocational education on their non-farm incomes.The results from Mincer model showed that the schooling returns in Chinese western rural area were estimated to range from2.7%to3.9%, that were lower than the average levels in Chinese whole rural area that are estimated in the other recent studies, by using propensity score matching to roll out the heterogeneous bias, show that the average treatment effect on the treated from highschool education was higher than that from secondary vocational education, indicating that the secondary vocational education is better for improving the rural labors’non-farm income. And the average treatment effect of the un-treated from highschool education was also higher than that from secondary vocational education, indicating that the education resources are not allocated reasonable. Fourthly, the result from the quantile regress indicates that the education has enlarged the non-farm income distribution gap. And the ratio of education to non-farm income distribution gap is4.7%to5.7%by Field decompose method, and4%to4.3%by Shapley decomposed method. Fifthly, by simulating the counterfactual condition to estimate the effect of education spread policy. The results indicate that, it will make little sense if the government keep spread the nine-year compulsory education. If the secondary education after junior high school could be popularized by the government, the income level would improve greatly. The rural labors’ income would improve27.9%and32.4%separately if the highschool education and secondary vocational education is popularized, and the GINI coefficient and poverty population would decrease largely. Finally, some policy suggests are presented base on the results.