COLLEGE EXPANSION, TRADE, AND INNOVATION: EVIDENCE FROM CHINA

Xiao Ma

International Economic Review, 2024, vol. 65, issue 1, 315-351

Abstract: China has expanded the yearly quota on newly admitted college students by more than seven times since 1999. How did this massive education expansion affect firms' export and innovation choices? I document that after this expansion impacted the labor market, manufacturing firms' innovation increased considerably, especially among exporting firms, accompanied by sizable skill upgrading of exports. I then develop a multi‐industry spatial equilibrium model, featuring skill intensity differences across industries and heterogeneous firms' innovation and export choices. Quantitatively, the college expansion explained 72% of increases in China's manufacturing research and development (R&D) intensity between 2003 and 2018 and also triggered export skill upgrading.

Date: 2024
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