Essays on family investments, education policy and returns in China

This thesis conducts an empirical analysis which explores the impact of parental investment, birth control policy and higher education expansion reform on individuals’ education attainments and labour market outcomes in China. The thesis includes three substantive chapters. Firstly, Chapter 3 presents new evidence on the child quantity-quality (Q-Q) trade-off in China. The primary contribution is the use of a new instrumental variable (IV) for fertility, i.e., local policy relaxation regarding Chinese birth control, in order to establish the causal effect of family size on child educational attainments and health outcomes. The aim is to examine whether having more children in a family has a negative impact on child quality and if the higher education of parents and a larger household income have a positive impact on child outcomes. Additionally, this estimation can check the effectiveness of the one-child policy. The findings indicate that there is a negative effect of fertility on education outcome, and support the prediction made by the Becker and Lewis’ model regarding the Q-Q trade-off for children. However, there is no evidence for health outcome. Secondly, Chapter 4 studies the role of higher education expansion policy in increasing the equality of higher education opportunities. In 1999, government rapidly expanded the number of higher education places available. The goal of this chapter is to explore the impact of family background and gender on access to higher education, prior to and following the higher education expansion policy. The analysis is based on nationally representative data from the Chinese Family Panel Studies (CFPS), collected in 2010. Cohort-level analysis and a difference-in-difference model were used to estimate how the benefits of the education expansion were distributed. The results show that higher education expansion has not been equally distributed among people from richer and poorer backgrounds. The education of parents remains a strong determinant of educational outcomes among children following education reform. Despite the benefits brought on by the expansion system, such as more opportunities for accessing tertiary education, these benefits have not been distributed evenly among families, geographies or gender. The equality of higher education opportunities remains a difficult task. Finally, Chapter 5 examines the causal impact of higher education expansion policy on labour market outcomes for young college graduates. Large pooled cross-sectional datasets were used from the Chinese Household Income Project (CHIP) between 1995 and 2013. First, the Mincer-style of returns to education for young cohorts were estimated in the 1995, 2002, 2007 and 2013 survey years. The aim was to compare the extent of returns to education among the pre-expansion cohort and the post-expansion cohort, and evidence is found a significant decrease in the returns to higher education of young cohorts. Second, another approach quantifies the effects of educational expansion on labour market outcomes and identifies the distribution of returns to education by exploring a natural experiment. This study exploited variation in the intensity of expansion in college numbers across provinces and applied a difference-in-difference model to estimate the effect of the education reform. The results of the study also illustrate expansion has a negative effect on college graduates’ returns and labour market outcomes.