This article evaluates the Chinese labour market by examining the role of human capital in wage determination. Using data from China’s Household Nutrition Survey, we estimate the returns to education in state-owned, collective-owned and private sectors. In the private sectors, the returns to education increase from 0-2 per cent in the late 1980s and early 1990s to about 4 per cent in 1997, while those of public sectors do not increase. This suggests that the labour market is segmented and human capital is more explicitly rewarded in the private sector. We correct for self-selection error using switching model, but the main results remain unchanged.
labour market segmentation human capital wage determination transition