Migration Networks, Export Shocks, and Human Capital Acquisition: Evidence from China

Abstract

This study empirically examines the impact of tariff reduction caused by trade liberalization on high school enrollment choice of the rural population in China in 1997–2005. We use the variation of export tariffs over time and the initial export structure across prefectures in China to construct prefecture-specific tariff shocks. Different from previous studies that focus on trade-induced shocks on the local economy, this study complements the literature by examining across-region spillover effects of trade-induced shocks through initial migration networks. The empirical analysis finds that the reduction of export tariffs at the migration-destination prefectures significantly decreases the rate of high school enrollment of the cohort between 16 and 18 years old from rural areas of the original prefecture. The mechanism analyses of the impact suggest that employment rates of migrants rise significantly with the reduction of export tariffs at destinations, which thus raises the expected returns of migration and increases the rate of dropping out of school after finishing junior high school education required by compulsory education law. We also find that the impact is stronger for females and people from regions with high initial migration intensity.

Keywords: Trade liberalization, Tariff shocks, Educational choice, High school enrollment, Migration networks

JEL Classification: F16, J24, O12, O14