Quota removal, destination-specific export shocks, and skill acquisition in China

Abstract

This paper uses the exposure of 16-year-old cohorts to an exogenous elimination of export quotas to explore the short-run schooling consequence of destination-specific export expansions and the longer-run effects on adult outcomes. We find that export expansions to rich-country markets resulted in substantially higher high school enrollment rates. The expansions disproportionately favored urban children and children in regions with lower initial skill endowment. Subsequently, the effects translate into the achievement of high school attainment but not the achievement of college and above education. More than a decade later, the affected cohorts exhibit significant differences in employment and fertility outcomes, highlighting the persistent effects of the shocks. Finally, we provide evidence that human capital effects work through an increased educational investment of households, driven by a mechanism involving parental wage growth and education premium in local labor markets.