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China’s Expansion of Higher Education: the Labour Market Consequences of a Supply Shock

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  • John Knight
  • Deng Quheng
  • Li Shi

Abstract

In the decade 1998-2008 China expanded enrolment in higher education almost six-fold. For the examination of its short term labour market consequences, this unprecedentedly huge and sudden policy change might be regarded as a natural experiment. After providing a theoretical framework for analysis, the paper uses urban labour market surveys to analyse how the labour market adjusted to the supply shock. Three outcomes are examined: the effect of the expansion on wages, on unemployment, and on access to ‘good jobs’. The shock is found to reduce relative wages, raise the unemployment rate, and reduce the proportion in good jobs, but only for the entry-year or entry-period cohort of graduates. The effect is fairly powerful for entrants, especially university rather than college graduates, but incumbent graduates are largely protected from the supply shock. An attempt is made to examine the labour market effects of the quantitative expansion on educational quality. The paper provides insight into the operation of China’s labour market in recent years.

Suggested Citation

  • John Knight & Deng Quheng & Li Shi, 2016. "China’s Expansion of Higher Education: the Labour Market Consequences of a Supply Shock," CSAE Working Paper Series 2016-04, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2016-04
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    2. Wang, Chuhong & Liu, Xingfei & Yan, Zizhong & Zhao, Yi, 2022. "Higher education expansion and crime: New evidence from China," China Economic Review, Elsevier, vol. 74(C).
    3. Fengyan Dai & Fang Cai & Yu Zhu, 2022. "Returns to higher education in China – evidence from the 1999 higher education expansion using a fuzzy regression discontinuity," Applied Economics Letters, Taylor & Francis Journals, vol. 29(6), pages 489-494, March.
    4. Huang, Bin & Zhu, Yu, 2020. "Higher Education Expansion, the Hukou System, and Returns to Education in China," IZA Discussion Papers 12954, Institute of Labor Economics (IZA).
    5. Ong, David & Yang, Yu (Alan) & Zhang, Junsen, 2020. "Hard to get: The scarcity of women and the competition for high-income men in urban China," Journal of Development Economics, Elsevier, vol. 144(C).
    6. Luo, Haotian & Hu, Qing, 2024. "A re-examination of the influence of human capital on urban-rural income gap in China: College enrollment expansion, digital economy and spatial spillover," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 494-519.
    7. HORIE, Norio & IWASAKI, Ichiro & KUPETS, Olga & MA, Xinxin & MIZOBATA, Satoshi & SATOGAMI, Mihoko, 2023. "Wage Functions in China and Eastern Europe : A Large-Scale Comparative Meta Analysis," CEI Working Paper Series 2022-08, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    8. Li, Yanjun & Liu, Xinyan & Tanaka, Ryuichi, 2025. "Beyond Higher Education: University Establishments and Childhood Maltreatment," GLO Discussion Paper Series 1590, Global Labor Organization (GLO).
    9. Feng, Yanxiang & Tan, Xinyang & Wang, Ruixin, 2022. "The value of higher education to entrepreneurial performance: Evidence from higher education expansion in China," China Economic Review, Elsevier, vol. 73(C).
    10. Hao, Zedong & Wang, Yun, 2022. "Education signaling, effort investments, and the market's expectations: Theory and experiment on China's higher education expansion," China Economic Review, Elsevier, vol. 75(C).
    11. Aftab Ahmed Memon & Zhimin Liu, 2019. "Assessment of Sustainable Development of the Performance of Higher Education Credentials in the Transitive Labor Market," Sustainability, MDPI, vol. 11(9), pages 1-14, May.
    12. Eyal Bar-Haim & Louis Chauvel & Anne Hartung, 2018. "More Necessary and Less Sufficient: An Age-Period-Cohort Approach to Overeducation in Comparative Perspective," LIS Working papers 734, LIS Cross-National Data Center in Luxembourg.
    13. Moraes, Ricardo Kalil & Wanke, Peter Fernandes & Faria, João Ricardo, 2021. "Unveiling the endogeneity between social-welfare and labor efficiency: Two-stage NDEA neural network approach," Socio-Economic Planning Sciences, Elsevier, vol. 77(C).
    14. Wang, Feicheng & Liang, Zhe & Lehmann, Hartmut, 2021. "Import Competition and Informal Employment: Empirical Evidence from China," IZA Discussion Papers 14650, Institute of Labor Economics (IZA).
    15. Kong, Dongmin & Zhang, Bohui & Zhang, Jian, 2022. "Higher education and corporate innovation," Journal of Corporate Finance, Elsevier, vol. 72(C).
    16. Shuang Chen, 2022. "The Positive Effect of Women’s Education on Fertility in Low-Fertility China," European Journal of Population, Springer;European Association for Population Studies, vol. 38(1), pages 125-161, March.
    17. Juanjuan Chen & Yabin Zhang & Zhujia Yin, 2018. "Education Premium In The Online Peer-To-Peer Lending Marketplace: Evidence From The Big Data In China," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(01), pages 45-64, March.
    18. Hanushek, Eric A. & Wang, Yuan & Zhang, Lei, 2025. "Understanding trends in Chinese skill premiums, 2007–2018," Journal of Comparative Economics, Elsevier, vol. 53(2), pages 584-608.
    19. Bollinger, Christopher & Ding, Xiaozhou & Lugauer, Steven, 2022. "The expansion of higher education and household saving in China," China Economic Review, Elsevier, vol. 71(C).
    20. John Knight, 2021. "A Tale of Two Countries and Two Stages: South Africa, China and the Lewis Model," South African Journal of Economics, Economic Society of South Africa, vol. 89(2), pages 143-172, June.
    21. Shao-Hsun Keng & Peter F. Orazem, 2019. "Performance pay, the marriage market and rising income inequality in Taiwan," Review of Economics of the Household, Springer, vol. 17(3), pages 969-992, September.
    22. Hu, Chenxu & Bollinger, Christopher, 2021. "Effects of cohort size on college premium: Evidence from China's higher education expansion," China Economic Review, Elsevier, vol. 70(C).
    23. Karimi, Seyed M. & Taghvatalab, Golnaz, 2020. "Access to higher education and the likelihood of being married," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 22-33.
    24. Sylvie Démurger & Eric A. Hanushek & Lei Zhang, 2024. "Employer Learning and the Dynamics of Returns to Universities: Evidence from Chinese Elite Education during University Expansion," Economic Development and Cultural Change, University of Chicago Press, vol. 73(1), pages 339-379.
    25. Zhang, Lin, 2022. "Age matters for girls: School entry age and female graduate education," Economics of Education Review, Elsevier, vol. 86(C).

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    Keywords

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    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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