The Impact of Rustication on Sent-Down Cohorts¡¯ Income

We estimate the impact of rustication on sent-down cohorts during the decade period of the Cultural Revolution, relying on econometric methods and policy reviewing. The data used from the Chinese Household Income Project (CHIP) for the years 1995 and 2002 show that the average income of sent-down cohorts is higher than those who were not sent-down, which seems to conflict with the human capital theory that predicts that education increases future expected returns. This paper separates the impact of ability, family background, and policies on intellectual youth and finds that their rustication had a significant negative effect for the sent-down cohorts. Correction for sent-down cohorts¡¯ working experience from the year they went to the countryside decreases the income inequality among low-income sent-down cohorts, and compensates for the negative effects of the sent-down experience.