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Three Essays on Human Capital Investment in China University of Pennsylvania ScholarlyCommons Gansu Survey of Children and Families Dissertations Gansu Survey of Children and Families 9-2012 Three Essays on Human Capital Investment in China Qihui Chen University of Minnesota Follow this and additional works at: https://repository.upenn.edu/gansu_dissertations Part of the Education Commons, and the Sociology Commons Chen, Qihui, "Three Essays on Human Capital Investment in China" (2012). Gansu Survey of Children and Families Dissertations. 8. https://repository.upenn.edu/gansu_dissertations/8 Suggested Citation: Chen, Qihui. 2012. Three Essays on Human Capital Investment in China (Doctoral dissertation). University of Minnesota. This paper is posted at ScholarlyCommons. https://repository.upenn.edu/gansu_dissertations/8 For more information, please contact [email protected]. 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 sex-composition 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 one-child 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). Keywords educational sociology, Asian studies, women's studies, labor economics, demography Disciplines Education | Social and Behavioral Sciences | Sociology Comments Suggested Citation: Chen, Qihui. 2012. Three Essays on Human Capital Investment in China (Doctoral dissertation). University of Minnesota. This thesis or dissertation is available at ScholarlyCommons: https://repository.upenn.edu/gansu_dissertations/8 Three Essays on Human Capital Investment in China A DISSERTATION SUBMITTED TO THE FACULTY OF UNIVERSITY OF MINNESOTA BY Qihui Chen IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY ADVISER: PAUL GLEWWE September 2012 © Qihui Chen 2012 Acknowledgements I am indebted to many people who generously provided guidance, assistance, and support in writing this dissertation. Foremost, I would like to acknowledge my exceptional doctoral committee. Paul Glewwe has been an inexhaustible mentor who introduced me to applied econometrics, development microeconomics and the economics of education, to survey design and data collection, and to empirical research in developing countries. As teacher and advisor, he has shaped my development as an applied economist. This dissertation would not have been possible without his tutelage. Glenn Pederson has always urged me to think carefully about what might be missing in my empirical models and how to interpret empirical results. Qiuqiong (QQ) Huang has tirelessly pushed me to organize my arguments in a coherent way. She has also shared with me her profound knowledge about rural China. Sandy Weisberg has taught me how to appreciate the usefulness of statistical tools beyond the scope of economic applications, and he always pointed out to me mistakes that economists often make when conducting statistical analysis. The diverse academic background of the committee members – Paul as an development economist, Glenn as a financial economist, QQ as a resource economist, and Sandy as statistician – has also greatly broadened my horizons by helping me ask probing questions and to look for answers in disparate sources. Numerous other members of the University of Minnesota community provided useful feedback and suggestions as well. Terry Roe always reminded me not to forget about the economics behind my econometric models. Rodney Smith taught me a substantial amount of knowledge in production economics, which turned out to be the primary framework of my empirical models. Tom Stinson showed me how to understand education issues from a public finance perspective, and kindly invited me to present my preliminary work in his class. Tade Okediji told me about many interesting African stories, and encouraged me to think about the implications of institutions. I have also benefited tremendously from interactions with fellow graduate students at the University of Minnesota. Wonho Chung, Tetsuya Horie, Jaya Jha, Bhagyashree Katare, Phatta Kirdruang, Andrew Larson, Jimyoung Moon, Devon Philips, Xudong Rao, Uttam i Sharma, Sakiko Shiratori, Shinya Takamatsu, Meng Zhao, and Haochi Zheng, just to name a few, shared their knowledge, as well as their enthusiasm for economics, with me. I have also benefited tremendously from interactions with colleagues from outside the University of Minnesota. Emily Hannum at the University of Pennsylvania and Albert Park at Hong Kong University of Science and Technology kindly provided me the opportunity to participate in the Gansu Survey of Children and Families project. And they taught me a great deal about data collection and household survey in our fieldwork. This dissertation also benefits from data from the China Health and Nutrition Survey (CHNS). I thank the National Institute of Nutrition and Food Safety, China Center for Disease Control and Prevention; the Carolina Population Center, University of North Carolina at Chapel Hill; the National Institutes of Health (NIH; R01-HD30880, DK056350, and R01-HD38700); and the Fogarty International Center, NIH, for financial support for the CHNS data collection and analysis files since 1989. My gratitude is also extended to the Department of Applied Economics and the Carlson School of Management at the University of Minnesota for generous financial support of my graduate studies. I also thank the Center for International Food and Agricultural Policy at the University of Minnesota for financially supporting my travels to China. However, I am most grateful to my family for showing unyielding enthusiasm for my graduate studies. My parents encouraged me in every academic pursuit, and they have always been curious about my research. My wife Qingyun (Sherry) supported me in every possible way: she generously offered her encouragement, she taught me many qualitative methods, and she has always been the first reader of every draft of this dissertation. Most importantly, her interactions with our precious baby daughter, Ellie, greatly deepen my understanding of the mechanism of the intergenerational transmission of human capital. ii 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 sex- composition 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 one- child 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
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