Biting the Hand that Teaches: Unraveling the Economic Impact of Banning Private Tutoring in China

54 Pages Posted: 12 Apr 2024

See all articles by Zibin Huang

Zibin Huang

Shanghai University of Finance and Economics - College of Business

Yinan Liu

Renmin University of China

Mingming Ma

Xi'an Jiaotong-Liverpool University (XJTLU)

Leo Yang

Stanford University - Centre on China’s Economy and Institutions

Date Written: March 14, 2024

Abstract

The prevalence of shadow education in China has been a significant social issue, commonly regarded as a leading factor in exacerbating education inequality and fostering overcompetition. In response to this concern, the Chinese government implemented the Double Reduction Policy in July 2021, which banned for-profit academic private tutoring. We estimate the economic consequences of this policy on the education industry in China by employing two novel datasets containing online job postings and firm registration information. We find that within four months after the Policy, online job postings for tutoring-related firms decreased by 89\%, tutoring-related firm entry decreased by 50\%, and their exits tripled. Cities with 10 thousand (2 percent) more children lost 50 (3.7 percent) more education-related job opportunities, experienced 0.3 (5.9 percent) fewer firm entries, and 0.1 (1.3 percent) more firm exits per month. Surprisingly, not only academic tutoring firms were impacted, untargeted businesses involving in arts and sports tutoring were also heavily struck, though they were specifically encouraged by the policy to promote children's non-academic ability. Back-of-the-envelope calculations show that this policy led to 3 million job losses in four months and at least 11 billion RMB Value Added Tax losses in 18 months nationally.

Keywords: Double Reduction Policy, Shadow Education, Private Tutoring, Labor Demand

JEL Classification: I24, J23, I28

Suggested Citation

Huang, Zibin and Liu, Yinan and Ma, Mingming and Yang, Yang, Biting the Hand that Teaches: Unraveling the Economic Impact of Banning Private Tutoring in China (March 14, 2024). Available at SSRN: https://ssrn.com/abstract=4758676 or http://dx.doi.org/10.2139/ssrn.4758676

Zibin Huang

Shanghai University of Finance and Economics - College of Business ( email )

777 Guoding Road
Shanghai, 200433
China

Yinan Liu (Contact Author)

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, 100872
China

Mingming Ma

Xi'an Jiaotong-Liverpool University (XJTLU) ( email )

111 Renai Road, SIP
, Lake Science and Education Innovation District
Suzhou, JiangSu province 215123
China

Yang Yang

Stanford University - Centre on China’s Economy and Institutions ( email )

Stanford, CA
United States

HOME PAGE: http://leoyang.org

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