Export Expansion, Employment Growth and the Individual Investment in Education

Abstract

The expansion of export during the past two decades has increased the employment in manufacturing and service sectors. Arrival of employment opportunities increases the opportunity costs of education and thus affects the individual decision of education investment. By exploiting the exogenous labor demand shock of export and using the instrumental variable approach, this paper empirically examines the effects of non-agricultural employment growth on education investment decision at the individual level. The paper finds that employment opportunities due to export significantly decrease the enrollment rates of high school and college. A one percentage increase in the share of non-agricultural workers of the total labor force decreases the high school enrollment among youth aged from 16-18 by 0.17%, and decreases the college enrollment among youth aged from 19-21 by 0.26%. Holding other factors constant, these estimates imply that the increase of non-agricultural employment due to export between 1990-2005 decreases the enrollment rates of high school and college by 5.4 and 8.6 percentage points, respectively. There are also substantial differences in the educational effects of employment growth by gender and by hukou status. Comparing to women, the decline of education investment is larger for men. While the enrollment rates of high school and college are both negatively affected by the employment growth for rural students, only the college enrollment is negatively affected by the employment growth for urban students. In contrast, arrival of jobs induced by export increases the high school enrollment of urban students.

Keywords: Export Expansion, Employment Growth, Educational Investment Decision

JEL Classification: F16, J24, I21, O15