Essays on labor market and college education in China

This dissertation consists of three chapters. The first chapter empirically examines the response in human capital investment to an abrupt change in the returns to education by studying the Chinese State-Owned Enterprise ("SOE") Reform in 1997, which resulted in a massive layoff ("xiagang") and more autonomous wage setting and labor hiring. I analyze the skill-group-specific change in employment and earnings associated with the SOE reform, and in turn the impact on tertiary educational outcomes. I exploit the geographic variations in the exposure to the SOE reform stemming from the initial industrial shares in employment in 1990, and decennial national SOE employment change for each industry. The SOE reform in urban China widened the discrepancy in expected employment probabilities between the tertiary- and the non-tertiary-educated, but not in college earnings premium. Young adults in more-intensely impacted prefectures became more likely to attain tertiary education after the reform. This is the first examination of the impact of SOE reform on higher-education outcomes. The second chapter studies the cross-demographic-group heterogeneity in the employment response to the trade liberalization in early 2000s in China, and explores migration as a channel through which increases in exports and imports of inputs benefited some gender-education groups. Opening up to trade brought about increases in labor demand in trade-related industries, and I explore the geographic variations in trade exposure by constructing shift-share measures of trade shocks from exports and imports of inputs, exploiting the prefecture-level employment distribution across industries and the national per-worker trade increases in each industry. Employment in China display a drastic shift from farm to manufacturing employment in response to increased trade exposure. Across demographic groups, non-college workers had a much larger employment response than college workers, despite having a lower overall increase in trade exposure. There is no significant gender heterogeneity in the out-of-farm shift of employment across skill groups. That the employment responses were largest for non-college workers and shifts from farm to manufacturing strongly indicate the mechanism of rural-to-urban migration. It is strengthened by the finding that employment impacts only exist for migrant workers instead of locals. Increases in trade exposure is associated with increases in only the non-college rural-origin in-migrants, exclusively so for those who end up working in non-farm industries. The third chapter studies potential policies/factors that could contribute to the narrowed and reversed college gender gap (male relative to female) in China during 1998-2015: the male-to-female ratio of post-secondary students decreased from 1.6 in 1998 to 0.9 in 2015. Three policies/factors are evaluated in terms of how they affected labor market returns to college and hence college decisions across gender: (1) SOE reform in 1997 that reduced employment probability more for low-skilled workers and especially women; (2) Trade liberalization in the early 21st Century that introduced trade-related jobs, especially for the non-college workers; and (3) The surge in real estate and construction industry post-2005, during which low-skilled construction employment grew much more for men. These three factors all point to gender differences in the opportunity costs of going to college via their impacts on low-skilled employment, which would in turn affect college decisions. Using a cohort-based event-study model, individual-level college attainment across gender and cohorts are related to normalized intensity measures of three factors across geographic areas. The SOE reform and construction boom was not associated with the females catching up with males in college education, despite suggestive evidence that they decreased (increased) the opportunity cost of college for females (males). Trade liberalization was unexpectedly associated with narrowing college gender gap, even though its impacts on skill-group employment gap do not differ by gender. However, women went to college at a faster (slower) rate than men in areas with higher male (female) trade shocks when they replace the overall trade shock, a results consistent with theory. Future research could aim to find factors that explain why the male shocks are more pronounced when only the overall trade shock is examined.