Economic Transition, Higher Education and Worker Productivity in China

Title: Economic Transition, Higher Education and Worker Productivity in China
Format: Journal Article
Publication Date: January 2011

We investigate the role of education on worker productivity and firms' total factor productivity using a panel of firm-level data from China. We estimate the returns to education by calculating the marginal productivity of workers of different education levels based on estimates of the firm-level production function. We also estimate how the education level of workers and CEO contributes to firms' total factor productivity. Estimated marginal products are much higher than wages, and the gap is larger for highly educated workers. Our estimate shows that an additional year of schooling raises marginal product by 30.1%, and that CEO's education increases TFP for foreign-invested firms. Estimates vary substantially across ownership classes, the effect of schooling on productivity being highest in foreign-invested firms. We infer that market mechanisms contribute to a more efficient use of human capital within firms.

Ivan Allen College Contributors:
External Contributors: Belton M. Fleisher, Yifan Hu, Seonghoon Kim

Fleisher, Belton M., Yifan Hu, Haizheng Li, and Seonghoon Kim. "Economic Transition, Higher Education, and Worker Productivity in China." Journal of Development Economics 23.3 (2011):  86-94.

  • Applied Microeconomics
  • Chinese Economy
  • Economic Development
  • Labor Economics
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Related Departments:
  • School of Economics