Returns to education and wage disparity in a transitional labour market: evidence from China 2005 national survey

Qiang Ren, Peking University
Qiang Fu, Duke University

Wage discrimination in a transitional labour market in China has been widely paid attention by empirical and theoretical research recent years. With employing a spline regression model, a hierarchical linear model and a spacial model, this paper analyzes the role of returns to education in wage discrimination based on hukou types, and tests the theories of information economics and dual labor market for wage disparity, based on eleven provinces in southeast China from the 2005 1% National Population Sample Survey dataset. We found that different returns to education attainment explained the effect of hukou types on wage disparity. Theory of information economics was confirmed that the gap of returns to education is a way to explain wage discrimination against rural immigrants, rather than prejudice. The hypothesis that education may engender wage disparity in the dual labor market with “primary” and “secondary” sectors was proved in explaining China’s rural-urban migration.