Education, Employment and Human Capital Investment in China: Reality and Expectation*

Yang Ziwei (杨紫薇) and Xing Chunbing (邢春冰)
Shenzhen Taxation Bureau No. 1 Sub-Bureau, the State Taxation Administration (SAT), Shenzhen, China
Business School, Beijing Normal University, Beijing, China

Abstract: With the national population census data and sample survey data of 1990, 2000, 2005, 2010 and 2015, this paper examines the evolving relationship between education and unemployment, and carries out an empirical analysis on how such correlation affects the expected return on education. Our findings suggest that education can significantly reduce the risk of unemployment, but this effect varied over time during 1990-2015. Education’s effect in reducing unemployment significantly increased from
1990 to 2000, but diminished from 2005 to 2015, particularly for the young group. This paper arrives at the ex post return on education estimated with 1995, 2002, 2007 and 2013 data of the Chinese Household Income Project (CHIP) and calculates the expected return on education based on such data. Results indicate that from 1995 to 2007, the expected return on education kept on the rise until it peaked in 2007. For the young group aged 22-
29, the expected return on education started to decline after 2002. This result is of great significance to unravelling return on education during China’s transition period and households’ decisions to invest in education.

Keywords: education, unemployment, expected return on higher education
JEL Classification Codes: I23, I26, J24, J31, J64
DOI: 1 0.19602/j .chinaeconomist.2020.03.06

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