The Urban-Rural Difference in Returns to Education in China from the Perspective of Household Registration Conversion

Overview & Synopsis

Previous studies have indicated that returns to education in rural people are significantly lower than that in urban people in China, while in fact, rural people have a high demand for education. To explain the findings, we analyzed such a seemingly contradictory phenomenon from the perspective of the influence of education on household registration conversion. Using the data from the China Household Finance Survey 2019, the study found that an increase in the educational level of rural people, especially after investing in higher education, can help increase the possibility of conversion to an urban household registration for better employment opportunities and higher income levels. The study considered urban individuals who have converted their household registration from agricultural to non-agricultural status as samples from rural people to re-estimate returns to education in urban and rural people. The results showed that returns to education and higher education in urban people changed little before and after the adjustment of samples. Whereas returns to education in rural people increased by 49.55% from 2.24% before adjustment of samples to 3.35% after adjustment of samples. The returns to higher education in rural people increased from 25.41% to 35.05%, an increase of 37.94%. This means that returns to education in rural people have increased significantly after considering the influence of education on household registration. The government should further increase investment in education in rural China to facilitate the integration of more rural people into the urban systems, which is conducive to the structural transformation of China's economy.