The Impact of Trade Liberalization on School Enrolment: Evidence from China

This paper exploits quasi-experimental variation in local exposure to the shock of China's accession to the World Trade Organization (WTO) to evaluate its impact on high school enrolment, a key margin of human capital accumulation. I construct a measure of prefecture-level trade exposure using initial industrial composition, industry-level tariff reductions, and spatially determined geographic trade costs, and I estimate both the short- and long-run impact of the shock on enrolment. Using detailed population census data on successive cohorts of 16-year-olds from 1995 to 2014, I find that a one-standard-deviation increase in exposure reduces high school enrolment by 8% relative to the baseline rate of the last pre-accession cohort. Surprisingly, this drop does not fade over time; it persists and even grows across successive cohorts. These results suggest that China's WTO accession created an export-driven labour demand shock biased toward low-skilled workers, which was in turn magnified by subsequent complementary investments.