BECE. Newsletter 

Vol.6, No.1, 2020 796 

 

 

 

 

The Impact of City Size on the Rate of Return to Edu-

cation 

By Yang, J., Ai, M.T. 

 

Correspondence to: Yang, J. Email: yangjuan@bnu.edu.cn  or  Ai, M.T. Email: 

aimeitong@pku.edu.cn 

N recent years, the capital cities represented by Xi’an and Wuhan have 

successively introduced policies to attracted talents to settle down. To bet-

ter study the talent mobility strategy, research published in China Economics 

of Education Review analyzed the impact of urban size on education returns 

in 2002 and 2012. The results show that: the effect of city size on the rate of 

return on education increased significantly over time. 

To be specific: 

 In 2012, for every 1% increase in the urban population, the labor 

force return to education increased by an average of 1.15%-1.21%. 

Among them, the male return to education increased by an aver-

age of 1.60%, and the female return to education increased by 

1.50%; and for every 1% increase in urban GDP, the return to ed-

ucation will increase by 1.07%-1.14%. Among them, the male 

education returns rate increased by 0.80%, and the female educa-

tion return rate increased by 0.72%. The results of correcting the 

endogenous bias through instrumental variables show that for 

every 1% increase in urban population, the rate of return to edu-

cation will increase by 4.84%-5.14%; for every 1% increase in 

urban GDP, the rate of return to education will increase by about 

2.80%-2.97%. 

 As the level of education increases, the impact of city size on the 

rate of return to education gradually increases. Among them, for 

every 1% increase in the size of the urban population, the differ-

ence between the educational return rate of the high school group 

and the university group relative to the junior high school group 

should be increased by 5.2% and 8.5%; and for each 1% increase 

in the urban GDP scale, the high school group and the university 

group relative to the junior high school group should be increased 

by 4% and 7.4%, respectively. The size of the city has a greater 

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Vol.6, No.1, 2020 797 

impact on the educational returns of people with a college educa-

tion or above. 

 Compared with the educational returns of different age groups, 

the urban scale shows an inverted U-shaped relationship. As age 

increases, the urban educational returns premium increases first 

and then decreases. For the workforce of 30-40 years old, the size 

of the city has the greatest impact on the rate of return on educa-

tion. As the age rises further, this effect will weaken. When con-

sidering the actual income adjusted by the price level, the positive 

effect of the city size on the return to education is weakened. 

When considering the actual income adjusted by the housing 

price level, the effect of the city size on the return to education 

changes from positive to negative. 

To this end, the author suggests that for smaller cities, it should be based 

on economic development, increase the degree of industrial agglomeration, 

and attract talents of all levels to employment, so as to achieve further expan-

sion of the city's scale. 

 
Source: China Economics of Education Review, 2020; 5(1):110-132.