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When Meritocracy Fails: College Expansion and the Rise of Intergenerational Persistence

Author

Listed:
  • Shijun Gu

    (Central University of Finance and Economics)

  • Lichen Zhang

    (University of Hong Kong)

Abstract

This paper quantifies the effects of college expansion under purely merit-based, competitive admissions, endogenizing pre-labor-market conditions. We develop a heterogeneous-agent life-cycle model where parents invest in their children’s pre-college human capital at multiple stages to compete for limited college slots. Applying the framework to China—where admissions rely solely on score ranks and enrollment has grown tenfold over the past 25 years—we find that score-based admissions increase the importance of human capital at the college admission stage relative to initial endowments. Family resources therefore shape admission indirectly through parental investment in pre-college human capital. Expanding college access under this system reduces intergenerational mobility because higher-income families respond by disproportionately increasing pre-college investments, strengthening the link between child achievement and parental income. Counterfactuals show that mobility would improve with college expansion if endogenous parental investment responses were shut down. (Copyright: Elsevier)

Suggested Citation

  • Shijun Gu & Lichen Zhang, 2026. "When Meritocracy Fails: College Expansion and the Rise of Intergenerational Persistence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 62, November.
    • Handle: RePEc:red:issued:26-41
    DOI: 10.1016/j.red.2026.101369
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    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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