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

ABSTRACT OF THE DISSERTATION
The Labor Market Impact of China’s Higher Education Expansion ReformbyYun FengDoctor of Philosophy in EconomicsUniversity of California, Los Angeles, 2019Professor Moshe Buchinsky, ChairThis 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 youngworkers’ labor market outcomes. Using data from the 2005 China Population Survey, Iestimate the effects of the reform using a diff-in-diff type of framework. The key variation Iuse 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 participationfor young workers. In the meantime, the reform increases the likelihood of getting a graduatedegree, which partly explains why it decreases labor force participation. Similar results areobtained for college cohorts using IV.In Chapter 2, I aim to address the caveats embedded in the empirical strategy in Chapter1. To do so, I construct and structurally estimate a dynamic discrete choice labor marketii
general equilibrium model, and innovate in modeling and estimation by incorporating thecollege admissions policy of China. Unlike in Chapter 1, this approach allows one to generatecounterfactuals and policy simulations while taking into account the general equilibriumeffects of the reform. After structurally estimating the model, I show that it matches keydata moments reasonably well.In Chapter 3, I examine the effects of China’s higher education expansion reform on theevolution of the college wage premium. I show that the reform interacts with the demo-graphics of workers and affects them differentially. Using the model developed in Chapter2, I find that in the presence of post-reform technological progress, the reform first increasesand then decreases the college wage premium. In its absence, however, the reform decreasesthe college wage premium from the start. I also find that in the latter case, workers inducedto go to college by the reform (compliers) gain the most on average, whereas those who goto college with or without it (always-takers) lose the most, because the large increase in thesupply 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 theaverage share of high-skill workers in developed countries.iii

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