The impact of education on earnings in China - A cross-provincial time series analysis of knowledge capital divergence

Abstract: The impact of education on earnings in China is primarily a quantitive analysis describing how divergence between Chinese provinces has grown in the period 1994 to 2004. The thesis is constructed around Mincerian thoughts on returns to schooling and endogenous growth theory emphasizing the crucial importance of government expenditure on knowledge capital for sustained growth. It further aims to analyze what influence Chinese gradual reform strategy has had on wage-levels and the evolution of tertiary education. Data has been gathered from different statistical yearbooks and worked through in order to make just calculations, taken into account CPI and provincial population rates. Empirical results are presented in elaborate timelines and comparative means charts and analyzed through year-by-year regressions together with panel data analysis displaying the impact of time, geography, rural population and educational attainment on growth rates for the provinces. Results are discussed in the light of economic theory, reform implementation, deepening contacts with the outside world and China-specific social structures. The purpose of the thesis is to provide explanations to why disparities have gotten so wide and with the help of theory give some insight to what measures could be taken by the Chinese government in order to reverse the negative trend.