The impact of globalization on youth education: Empirical evidence from China's WTO accession

This paper presents empirical evidence that export growth in China after its WTO accession in 2001 has altered education attainment for Chinese youths. On one hand, China's export expansion after the WTO entry has increased the opportunity cost of schooling and thus has induced many youths to drop out of school at younger ages; but on the other hand, the subsequent trade upgrading has also led to increased demand for additional education at the college level. This paper exploits variation in trade exposure in the timing of youth education decision and trade exposure variation among regions to identify the existence and the relative importance of these two effects of China's WTO accession. We document statistically significant and robust evidence that while export expansion has caused 2 months' reduction in youth schooling on average, it has led to 2 months increase for individuals with at least a high school education. Moreover, we find that the reduction in education is mainly caused by processing exports and predominantly experienced by youths in rural areas and from families with siblings, while the improvement in education can be largely attributed to exports to high income nations and is largely observed for youths from urban areas. Consistent with individuals making rational choices when faced with additional employment opportunities arising from globalization, these findings have important consequences for income distribution in China.