Economic returns to schooling in urban China OLS and the instrumental variables approach.pdfVIP

China Economic Review 20 (2009) 143–152 Contents lists available at ScienceDirect China Economic Review Economic returns to schooling in urban China: OLS and the instrumental ☆ variables approach Guifu CHEN, Shigeyuki HAMORI ⁎ Faculty of Economics, Kobe University, Kobe, Japan a r t i c l e i n f o a b s t r a c t Article history: This paper examines economic returns to schooling in urban China using ordinary least square Received 31 January 2008 (OLS) and instrumental variable (IV) methodologies. First, we find that OLS estimates of the Received in revised form 23 January 2009 returns to education are lower in China than in other transition economies, whereas IV Accepted 26 January 2009 estimates are higher in China. Second, we find that OLS, a method for estimating the returns to education without control for endogeneity bias, may underestimate the true rates of return for JEL classifi cation: men. In addition, if we do not control for endogeneity bias and the sample selection bias, we I21 may further underestimate the true rates of return for women. Finally, we find that OLS estimates of the returns to education for men are slightly higher than for women. The IV Keywords: Returns to schooling estimates for women are higher than those for men, and this difference incre