Estimating Education and Labor Market Consequences of China’s Higher Education Expansion

Abstract

China initiated a large-scale higher education expansion program in 1999. During the first three years of the expansion, postsecondary enrollment nationwide doubled. Leveraging the quasi-experimental nature of the program, I link administrative records on province-year level college admission quotas with individuals’ education and labor market information in 2013 from the Chinese Household Income Project, and employ a two-way fixed-effect model to estimate the expansion’s impacts on individuals’ education and labor market outcomes, and then use the expansion-induced variation in college access as an instrument for college education to estimate causal returns to college. Results show that the expansion substantially boosts individuals’ education outcomes, including completed years of schooling, and the probabilities of attending college and obtaining any postsecondary degrees. The expansion also improves individuals’ labor market outcomes, including probability of working, job stability, and hourly wage. My 2-stage least squares estimators imply that returns to education remain substantial in 2013. Returns to attending college and obtaining any postsecondary degrees are estimated to be 54–76 and 59–90 percent respectively. My analysis reinforces that enhanced access to college could raise individuals’ educational attainment and boost nations’ average level of human capital, and eventually benefit their labor market outcomes.