Labor mobility and migration and returns to education in rural China

This dissertation examines the role of schooling in promoting labor mobility and migration in China, offering a new way of estimating the returns to education in the presence of labor market segregation.; The Chinese government has severely restricted rural-urban labor migration since the early sixties, and until a decade ago had restricted the growth of nonfarm activities in rural areas. In the early-eighties, the government relaxed its policy on rural nonfarm employment, however, migration from rural to urban areas remained restrictive.; As a result of the urban-rural segregation, there was a large income gap between urban and rural residents, producing a strong incentive for rural people to seek urban residency. Using rural household survey data that cover the period between 1979 and 1985, this thesis finds that schooling was an important factor promoting rural nonfarm employment and migration from rural to urban areas in China. The returns to schooling are under-estimated if the estimation is based solely on earnings equations; they can be more accurately estimated by taking into account the effect of schooling on labor mobility.; Estimation results show that schooling earned a moderate rate of return through raising the probability of rural-urban migration. This offers an explanation to the puzzle of low returns to education found by many other studies and a relatively high schooling rate in China. It also sheds light on the recent fluctuation of schooling rates in China.