香港中文大学：Education, Rustication and Communist Party Membership：What Pays? What Does Not Pay?

Education, Rustication and Communist Party Membership: What Pays? What does Not Pay? Hongbin L Junsen Zhang (Others) The Chinese University of Hong Kong

1 Education, Rustication and Communist Party Membership: What Pays? What Does Not Pay? Hongbin Li Junsen Zhang (Others) The Chinese University of Hong Kong

First twins data from china The first socioeconomic twins data collected by Junsen Zhang and nbs from china also first in asia MZ(monozygotic) twins are genetically identical twins DZ (fraternal)twins are non-identical twins a series of papers based on this dataset My talk focuses on 3-4 papers regarding the returns to human/political capital in China-Do the following factors matter for earnings? Education The Communist party membershi lIp Forced rustication during Cultural Revolution (if time permits) Spousal education(if time permits)

2 First twins data from China ◼ The first socioeconomic twins data collected by Junsen Zhang and NBS from China, also first in Asia ◼ MZ (monozygotic) twins are genetically identical twins ◼ DZ (fraternal) twins are non-identical twins ◼ A series of papers based on this dataset ◼ My talk focuses on 3-4 papers regarding the returns to human/political capital in China—Do the following factors matter for earnings? ◼ Education ◼ The Communist Party membership ◼ Forced rustication during Cultural Revolution (if time permits) ◼ Spousal education (if time permits)

Does education Pay in Urban China? Estimating returns to education Using twins Ho Pak Wai liu g Junsen Zhang The Chinese University of Hong Kong

3 Does Education Pay in Urban China? Estimating Returns to Education Using Twins Hongbin Li Pak Wai Liu Ning Ma Junsen Zhang The Chinese University of Hong Kong

中国应试教育的代价

4 中国应试教育的代价

Returns to education in China a Recently, economists have started to estimate the return to education using Chinese data a Early studies find rather low returns: 2-4%0 (Byron and Manaloto, 1990; Meng and Kidd, 1997) Economists, including heckman believe that the return should increase with economic transition Indeed. recent data show larger returns: 7-10 (Heckman and Li, 2004; Zhang et al., 2005)

5 Returns to education in China ◼ Recently, economists have started to estimate the return to education using Chinese data ◼ Early studies find rather low returns: 2-4% (Byron and Manaloto, 1990; Meng and Kidd, 1997) ◼ Economists, including Heckman, believe that the return should increase with economic transition ◼ Indeed, recent data show larger returns: 7-10% (Heckman and Li, 2004; Zhang et al., 2005)

Two problems with this literature None has established causality a Economists have ignored a very important aspect: the Chinese education system

6 Two problems with this literature ◼ None has established causality ◼ Economists have ignored a very important aspect: the Chinese education system

Our contributions a Estimate the causal effect of education using twins data we collected a Investigate how the Chinese education system may have affected the return to education

7 Our contributions ◼ Estimate the causal effect of education using twins data we collected ◼ Investigate how the Chinese education system may have affected the return to education

Empirical specification: OLS One equation log(earnings of person i y=Xa+B,; +ZB2+u+8 (1) y: log of monthly earnings Edu: years of schooling X: observable family variables Z: observable individual variables(age, gender job tenure) unobservable determinants of earnings lybbthesis: Edu has a positive effect on earnings Difficult to identify this effect because of endogeneity

8 Empirical specification: OLS ◼ One equation: log(earnings) of person i ◼ y: log of monthly earnings ◼ Edu: years of schooling ◼ X: observable family variables ◼ Z: observable individual variables (age, gender, job tenure) ◼ : unobservable determinants of earnings ◼ Hypothesis: Edu has a positive effect on earnings ◼ Difficult to identify this effect because of endogeneity (1) i Xi 1 Edui Zi 2 i i y =  +  +  +  + 

Empirical specification Within-twin-pair estimations Twins: log(earnings) of twins in family Vi=X,+B,Edui+Z1 B2+u:+a y2=Xa+BEu2+22B2+1+E2 (3) Taking the within-twin difference we have y1-y21=B(Eh1-E2)+(21-Z2)B2+E1-E2(4) Note that the unobservables u has been removed

9 Empirical specification: Within-twin-pair estimations ◼ Twins: log(earnings) of twins in family i ◼ Taking the within-twin difference, we have ◼ Note that the unobservables, has been removed (3) (2) 2 1 2 2 2 2 1 1 1 1 2 1 i i i i i i i i i i i i y X Edu Z y X Edu Z           = + + + + = + + + + ( ) ( ) (4) 1i 2i 1 Edu1i Edu2i Z1i Z2i 2 1i 2i y − y =  − + −  + − 

Empirical specification: GLS Following ashenfelter and Krueger( 1994) 11=yEha1+yEdh2+16+22+X。+ (5) r measures the selection effect, relating family effect to education Assume correlations between the family effect and education of each twin are the same y1=X1(a+6)+BEh1+y(Edl1+Eah21)+Z1(B2+)+El(6) y2=X(a+6)+BEdh2+y(Edl1+Edh21)+Z2(B2+6)+62(7) B,measures the return to education r measures the selection effect 10

10 Empirical specification: GLS ◼ Following Ashenfelter and Krueger (1994) ◼ measures the selection effect, relating family effect to education ◼ Assume correlations between the family effect and education of each twin are the same ◼ measures the return to education ◼ measures the selection effect ( ) ( ) ( ) ' (7) ( ) ( ) ( ) ' (6) 2 1 2 1 2 2 2 2 1 1 1 1 2 1 2 1 i i i i i i i i i i i i i i y X Edu Edu Edu Z y X Edu Edu Edu Z               = + + + + + + + = + + + + + + + (5) i Edu1i Edu2i Z1i  Z2i  Xi  i  =  + + + + +  1 