How Divergent Were Returns to Education Investments in China?

Abstract

This paper uses the wage increment approach to measure the social and private returns to educational investments in China at various educational levels and how they change over time. The social returns to the investments in higher education were found to be increasing over time whilst the returns to the secondary level were declining over time. This indicates that China should raise its annual investment in higher education vis-à-vis secondary schools. We also found that the private returns to undergraduate level were substantially smaller than those to secondary level. This may lead to under-enrollment in undergraduate education. The above divergences or imbalances, if not rectified, could give rise to increasing scale of skilled labor shortages at the time when the economy boomed.