This paper provides an answer to the following question: Why do empirical studies find low returns to schooling in rural China, and yet the schooling rates are high? I find that schooling played a significant role in raising the accessibility of urban formal employment to rural people in the late 1970s and early 1980s in the face of the government's restrictive policy on labor migration from rural to urban areas. The large urban-rural income difference provided a strong incentive for senior high school education. The theory also explains the drop in the senior high school attendance in the mid 1980s.
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