The paper examines the marginal returns of education in China for 4 years covering the period 1989–2000. We find, in common, with others that such returns were small in 1989 and 1993, but have increased steadily since 1993. We also find that the returns for women exceed those for men and go some way to reducing the gender earnings gap. Crucially, however, the returns to education decline with the length of time since the individual left school which is consistent with the hypothesis that education enhances ability and skills which in turn enhances earnings, but that the value of such skills deteriorates over time. Finally we find evidence for gravity effects by which earnings decline with distance from Beijing, and more noticeably, Shanghai.
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