The Causal Effect of Completing another Year of High School on Subsequent Earnings: New Evidence from the Chinese Cultural Revolution

I investigate whether the number of years of high school completed has a causal effect on subsequent labor-market earnings in China. I have extracted data from the Life History Survey in Contemporary China (LHSCC) on 1,053 urban workers who were aged 25 to 55 in 1996. My measure of educational attainment is the number of years that a worker completed in high school by age-25. My measure of labor-market earnings is the worker's monthly wage (in renminbi) in 1996.;To address my research question, I capitalize on the occurrence of the Cultural Revolution (1966--1977), a political movement that disrupted the schooling of 6.4 million high-school age children (Kwong, 1988). I argue that a child was naturally "assigned" to either a "treatment" (that is, completing fewer years of high school due to the disruption) or a "control" condition (in which the child's high-school education was not disrupted), largely based on the child's chronological age at the point of disruption. This natural "assignment" generated exogenous variation in high-school attainment, with potential consequences for future earnings of those children. I then adopt a regression-discontinuity (RD) strategy using instrumental-variables (IV) estimation to incorporate the exogenous disruption into my analyses.;Unfortunately, the small sample available to me renders the IV estimate of a modest effect statistically non-significant. I focus the discussion on the point value of my IV estimate. It indicates that, on average, completing another year of high school by age-25 increased a worker's monthly wage by 7%. The value is twice as large as that of a potentially biased ordinary least-squares (OLS) estimate. Furthermore, my findings are consistent across a number of sensitivity checks. My thesis research provides suggestive, if not definitive, evidence of the causal effect of completing another year of high school on subsequent labor-market earnings in urban China.