Inference For The Returns To Education

The returns to education is one of the most important indicator, since it not only can measure the education investment, but also can promote the development of social economy. The returns to education can be used to reflect the efficiency of resource utilization, to reflect the influence of income distribution of education, and to judge the labor allocation efficiency. So there is no doubt that the study on rates of return to education is of great significance.On the basis of reviewing the present literature on the returns to education, this paper uses pseudo-panel approach initially which was proposed by Deaton in 1985 to estimate the return of education in China. In order to better illustrate the results of the pseudo-panel approach, this study uses OLS and the pseudo-panel approach by STATA software to estimate the returns to Mincer individual education in China, according to the China Health and Nutrition Survey data. We do the empirical part of this paper with the following framework:firstly, we estimate an average return of education; secondly, we investigate the difference between the urban and the rural areas education return rates and the difference between genders education return rates; thirdly, we put forward some recommendations. The recommendations are like that rising individuals' income by popularizing an entire education; narrowing disparity between urban and rural education return by increasing rural education investment; narrowing gender education return differences by increasing female education investment.In this paper, the empirical study results of the return to education may make some conclusions. (1) Compared with the least-square estimation, there is an upward bias of returns to education in pseudo-panel approach with individual data. (2) The rates of education return to education estimated with classical Mincer model are higher than the one estimated with expanded model. (3) Using OLS estimation approach, the overall rate of education return is 3.94% with classic Mincer income model estimation; the overall rate of return is 3.45% with expanded model. Using pseudo-panel approach, the overall rate of education return is 12.55% with classic Mincer income model estimation; the overall rate of return is 9.55% with expanded model.(4)Individuals in urban areas have higher returns to education than those in rural areas. Using OLS estimation approach, the rate of urban return is 4.06% with classic Mincer model, while the rate of rural return is 3.60%;the rate of urban return is 3.74% with expanded model, while the rate of rural return is 3.28%. Using pseudo-panel approach, the rate of urban return is 8.69% with classic Mincer model, while the rate of rural return is 8.36%;the rate of urban return is 7.99% with expanded model, while the rate of rural return is 7.55%. (5) Females have lower returns to education than males. Using OLS estimation approach, the rate of male return is 4.06% with classic Mincer model, while the rate of female return is 3.50%; the rate of male return is 3.61% with expanded model, while the rate of female return is 3.36%.Using pseudo-panel approach, the rate of male return is 12.30% with classic Mincer model, while the rate of female return is 9.71%; the rate of male return is 9.11% with expanded model, while the rate of female return is 8.35%.