Human Capital Investment: Analysis of Returns from Education in China

The main objective of this thesis is to analyze whether the effect of investment in education has a positive impact on the size of wages or not in light of Gary Becker's approach. Meanwhile, other factors as mentioned below are also taken into consideration. This study is motivated by the current status of Chinese educational system, which has made great progress, but still faces challenges in terms of education equality and balanced development. The theoretical part describes a series of human capital theories proposed by Gary Becker, Theodore Schultz and Jacob Mincer, etc. Mincer earnings function is utilized as a theoretical basis in order to estimate the rates of return to both education and work experience through Ordinary Least Squares (OLS) regression. Specifically, in our equation, monthly wage is the dependent variable, while the independent variables include level of education, experience and experience-squared. Variable city is used to analyse the income difference between urban and rural areas. Results suggest that education and experience have positive impact on wage, which implies strong case for investment in education in China in vein of Becker's thoughts.