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Economic Effect of Language Ability on Income and Employment: The Evidence from China

Lucong Wang, Jingchao Dai
International Journal of Business and Management , Volume 16; doi:10.5539/ijbm.v16n2p54

Abstract: As a tool of communication and a carrier of information, language learning needs to pay the price and cost, language ability is also a form of human capital, which has an impact on income and employment. In order to found the economics effects of language ability, we studied relationship between language ability and income using China Family Panel Studies (CFPS) data from 2010 to 2016. We found that improvement of both Mandarin proficiency and English proficiency can significantly promote the total income and wage income. Considering the missing variables in the model and the endogeneity problem of reverse causality, instrumental variables were used to deal with the endogeneity problem, and the income effect of language ability still existed. From the perspective of the influence mechanism, social capital is an important channel through which language ability affects the total income of employees.
Keywords: model / income / endogeneity / proficiency / capital / Effect of Language / effects of language ability

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