NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Xuesong Li

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Working Papers

August 2003Selection Bias, Comparative Advantage and Heterogeneous Returns to Education
with James J. Heckman: w9877
This paper uses newly available Chinese micro data to estimate the return to college education for late 20th century China when allowing for heterogeneous returns among individuals selecting into schooling based on these differences. We use recently developed semiparametric methods to identify the parameters of interest. We demonstrate that heterogeneity among people in returns to schooling is substantial. People sort into schooling on the basis of the principle of comparative advantage, which we document to be an empirically important phenomenon in modern Chinese labor markets. Standard least squares or instrumental variable methods do not properly account for this sorting. Using new methods that do, we estimate the effect on earnings of sending a randomly selected person to college is a ...

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