The Rate of Return to Educational Investment for Engineers: Evidence from the Private Sector in China

Abstract

It is well-known that engineering is a key profession for both economic and social development. This is as true for China as it is for other countries which are in the process of development. However, what are the economic incentives for young people to enter the profession today? Currently, there are many studies of the rate of return to educational investment, but recent empirical studies of the rate of return to educational investment for engineers are uncommon. This is true generally, but especially for contemporary China. This is because it is difficult to obtain high-quality and representative sample data about engineers. This paper uses the data of the Chinese Family Panel Studies, 2010, and applies a Mincerian income function to estimate the rate of return to education for engineers who work in the private sector in urban China. The empirical results show that the rate of return for engineers is 12.3%, which is an impressive figure. It is in accordance with the current supply and demand of the Chinese labour market which requires many engineers to carry out construction and maintenance projects given China’s continuing industrialisation, modernisation and urbanisation. However, the empirical results also show that compared with the rate of return to education for professional and technical personnel who are employed in business economics and finance, the rate of return for engineers is significantly lower. This may explain why in China today the attraction of engineering education for talented young people is declining, with more and more students choosing business economics and finance as their first choices of major and career, rather than engineering as in the past.

Keywords

• rates of return to education
• engineering
• private sector
• china