Difference in returns to schooling between formal and informal employment in China

Abstract

ABSTRACT Based on the 2015 China Health and Nutrition Survey (CHNS), the difference in returns to schooling between formal and informal employment was empirically analysed using the IV-Heckman model. It is found in the research that there are significant differences in the average income and level of educational human capital between formal and informal employment, and that returns to schooling of formal employment is much higher than that of informal employment. In addition, the propensity score matching (PSM) method was used to study the returns to schooling of high school and university of the two employment groups. The results indicate that returns to schooling of high school and university of the formal employment are significantly higher than those of the informal employment group, while the difference in returns to schooling of university is greater than that of high school.