This paper uses 1988 and 1995 data from a national household survey to study across-region
dispersions and changes over time in returns to education for a large number of Chinese cities and to
analyze the determinants of schooling returns during economic transition. On average, the estimated
rates of return at the city level increased from 3.1 to 5.1% between these two years and the dispersion
widened significantly. During the same period, the gender earnings gap increased and the returns to
experience and Communist membership rose sharply. Individual cross section and city-level panel
data suggest that the presence of foreign and joint-venture firms, market job search channels, and
information infrastructure contributed to increased returns to education. However, the size of the
state sector constrained schooling returns. J