Wages and Returns to Education in Chinese Cities

This paper uses 1988 and 1995 data from a national household survey to document wages and returns to education for a large number of cities during China’s economic transition. Between these two years, average real wages and returns to education increased, yet their spatial dispersions across cities widened dramatically. While market-oriented reforms were expected to equalize returns to human capital across regions, there was no sign of significant wage convergence in Chinese cities during this period. I argue that coordinated reforms in pension systems, housing markets, hukou registration, and local government behavior are imperative for improving the integration of local labor markets in China.