Returns to higher education in China – evidence from the 1999 higher education expansion using a fuzzy regression discontinuity

ABSTRACT

China experienced a 47% expansion in higher education enrolment between 1998 and 1999 and a sixfold expansion in the decade to 2008. Using a fuzzy discontinuity in the months of births, we show that the 1999 expansion increased education by roughly 1 year around the cut-off point. Importantly, each additional year of university education induced by the expansion increases monthly earnings by 24%, whereas the corresponding OLS estimate is only 8%. Our findings are insensitive to alternative window widths, functional forms or the exclusion of the self-employed.

KEYWORDS:

• Returns to higher education
• higher education expansion
• regression discontinuity design
• China

JEL CLASSIFICATION:

• I23
• I26

Acknowledgements

We thank participants of the 17th IZA/SOLE Transatlantic Meeting of Labour Economics, the 2018 China Meeting of the Econometric Society and seminar at Shanghai Lixin University of Accounting and Finance for helpful comments. We are indebted to Gerard Pfann and Lei Xu for suggestions. Fengyan Dai acknowledges financial support from the Major Project of National Social Science Fund of China (project number: 19ZDA116).

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The hukou (household registration) system assigns people to urban or rural status at birth. Rural hukou holders face substantial disadvantages in access to education, labour market and social welfare (OECD 2016).

² Data resources: China Statistical Yearbook 2010 and 2017 (NBS various years).

³ We implement the two-step procedure and run bandwidth selection using the Stata routines rdrobust and rdbwselect, respectively.

⁴ Wan (2006) shows that the student–faculty ratio in Chinese HE jumped from 11.6 in 1998 to 19.0 in 2002.

Additional information

Funding

This work was supported by the Major Project of the National Social Science Fund of China [19ZDA116].