In this study, we explore the returns to education among different job locations for off-farm wage employment using nationally representative samples from rural China. Through a series of robustness checks, we conclude that there is heterogeneity in returns to education for different job locations within the rural labor force. Specifically, we have found that the returns to education for laborers in big cities are significantly higher than those for laborers working both in ordinary cities and within counties. That is to say, the utility of education is better-reflected in big cities. We conclude that the returns to education in big cities are 5.4 percent, while the returns to education are no more than 1 percent in ordinary cities and within counties. These results suggest that labor markets in the underdeveloped regions of China have factors that undermine the productivity effect of human capital.

Keywords: returns to education; labor market; off-farm wage employment; rural labor

Corresponding author: Weidong Wang, wangwd.15b@igsnrr.ac.cn