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The Labor Market Impact of China's Higher Education Expansion Reform

  • Author(s): Feng, Yun
  • Advisor(s): Buchinsky, Moshe
  • et al.

This dissertation studies the effects of China's higher education expansion reform on workers' labor market outcomes.

In Chapter 1, I investigate how China's higher education expansion reform affects young workers' labor market outcomes. Using data from the 2005 China Population Survey, I estimate the effects of the reform using a diff-in-diff type of framework. The key variation I use for identification is province-specific cohort-to-cohort variation in the expansion intensity. I find that the reform does not increase unemployment but reduces labor force participation for young workers. In the meantime, the reform increases the likelihood of getting a graduate degree, which partly explains why it decreases labor force participation. Similar results are obtained for college cohorts using IV.

In Chapter 2, I aim to address the caveats embedded in the empirical strategy in Chapter 1. To do so, I construct and structurally estimate a dynamic discrete choice labor market general equilibrium model, and innovate in modeling and estimation by incorporating the college admissions policy of China. Unlike in Chapter 1, this approach allows one to generate counterfactuals and policy simulations while taking into account the general equilibrium effects of the reform. After structurally estimating the model, I show that it matches key data moments reasonably well.

In Chapter 3, I examine the effects of China's higher education expansion reform on the evolution of the college wage premium. I show that the reform interacts with the demographics of workers and affects them differentially. Using the model developed in Chapter 2, I find that in the presence of post-reform technological progress, the reform first increases and then decreases the college wage premium. In its absence, however, the reform decreases the college wage premium from the start. I also find that in the latter case, workers induced to go to college by the reform (compliers) gain the most on average, whereas those who go to college with or without it (always-takers) lose the most, because the large increase in the supply of high-skill labor depresses skill prices. Policy experiments are conducted to show, if China were to continue with the expansion, how long it would take for it to reach the average share of high-skill workers in developed countries.

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