Three Essays on human capital investment in China

Abstract

This dissertation consists of three empirical essays on human capital investment issues in China. The first essay examines the trade-off between child quantity and quality in rural China, exploiting a source of exogenous variation in family size generated by the temporary relaxation in China’s one-child policy in the mid-1980s. The relaxed population policy allowed a rural couple to have a second child if the first-born was a girl. Exploiting this policy change, this essay creates IVs for family size from the sexcomposition of the first two children in a family. The IV results indicate that rural parents hardly face a trade-off between child quantity and quality, at least in terms of their monetary investments in children’s education. These results imply that relaxing the onechild policy, as has been proposed by many researchers as a solution to the “missing girls” problem, is unlikely to cause reductions in parental investments in children’s education. The second essay investigates the impact of parental education on children’s academic skills acquired in basic education (grades 1-9) in rural China. It uses the scores on a cognitive ability test as an error-ridden measure of child ability, and then instruments this ability measure using IVs generated from the Great Chinese Famine (1958-61). It finds that parental education has a statistically significant impact on children’s academic skills, even after controlling for child ability. Moreover, while father’s education matters for child math skills for both boys and girls, mother’s education matters only for girls. These results imply that promoting rural women’s education may be an effective way to reduce the gender gap in math skills. The third essay estimates the causal impact of mother’s education on standardized child height, exploring the Chinese Cultural Revolution (1966-76) to create IVs for mother’s education. The preferred IV estimates indicate that the loss in mother’s education due to the Chinese Cultural Revolution led to a 0.3 standard deviation decrease in child height. This loss is substantial, in a magnitude similar to the effect of being exposed in early childhood to the Chinese Great Famine (1959-61).