The impact of education on relative poverty and its intergenerational transmission —— Causal identification based on the Compulsory Education Law

Abstract

Using data from the Chinese General Social Survey (CGSS) and the China Statistical Yearbook, we explore a “quasi-natural experiment” made possible by the enactment of China's 1986 Compulsory Education Law to study the causal relationship between education and decrease in the incidence of relative poverty, as well as that between education and decrease in the intergenerational transmission of relative poverty. By applying a difference-in-differences estimation, we find the following: i. The probability of the offspring experiencing relative poverty decreases by 6–8% as the duration of their eligibility for compulsory education increases by 1 semester; education can block the intergenerational transmission of relative poverty. ii. The effects of education on reducing the incidence of relative poverty and blocking the intergenerational transmission of relative poverty are found mainly in rural areas and among female groups, while no significant effect is found in urban areas and among male groups. iii. High school graduation, labor market performance, and effort are three paths through which education reduces the incidence of relative poverty and blocks its intergenerational transmission.