[The Role Of Literacy In Economic Development In Contemporary China]

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ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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ABSTRACT

This study uses the most recent household survey data from 1995 to estimate returns to education in urban China. Most existing studies in the literature are based on data from the 1980s and find that the rates of return to education in China are remarkably low. This study investigates whether the returns have been underestimated and whether such returns have increased as economic reforms deepen in China. The estimates of returns in this study are considerably higher than previous estimates. Two factors explain the findings: first, previous works using annual earnings instead of hourly wages bias the estimates downward; second, returns to education have increased as the transition process has deepened in China. In addition, average annual returns above the elementary school level are considerably higher than the overall returns. Finally, the private sector rewards highly educated individuals the most, while the state-owned sector rewards low education levels the most, and the returns to education are higher in less-developed, low-income provinces.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

Aims and Objectives3

Summarized Outcomes3

CHAPTER 2: LITERATURE REVIEW5

China5

Education and economic development15

Literacy and Development17

Understanding Literacy Development "Lifelong and Life Wide"23

Longitudinal Quantitative Research29

Chinese Education and Child Labor34

History of Western Education and its impact on China37

Impact of Education on Chinese Society58

CHAPTER 3: METHODOLOGY59

Economic Development62

CHAPTER 4: RESULTS AND ANALYSIS66

Hourly wages, annual earnings, and rates of return to schooling66

Trends of returns to education71

CHAPTER 5: CONCLUSION78

REFERENCES81

CHAPTER 1: INTRODUCTION

Most existing studies find very low returns of income to education in China. Byron and Manaloto (1990), using a sample of 800 adults from 1986, report the rate of return as less than 4%. Knight and Song (1991), using education dummy variables, likewise find that the effect of education on earnings is remarkably slight, based on a sample of 3600 observations from 1986. Two other studies, by Johnson and Chow (1997) and Liu (1998), using the same data from the 1988 Chinese Household Income Project (CHIP-88), also estimate the return in the 3-4% range. Similar results can be found in Maurer-Fazio (1999).

These estimated returns are considerably lower than the 10.1% world average and the 9.6% Asian average, as well as the 11.2-11.7% range for low and middle income countries (those with a per capita income of less than $2449). Historically, great value has been placed on education in China, and the Confucian emphasis on education is integral to Chinese culture. Because of the Cultural Revolution and the egalitarian regime in the socialist system, however, the value of education has been largely ignored in recent decades. Still, if the earnings premium on ...