Market access and educational inequality in China

This paper investigates how globalization affects human capital investment within China's institutional context. We develop a general equilibrium model, incorporating endogenous education choices, to show that while globalization promotes overall human capital formation, it also exacerbates rural-urban college educational inequality due to China’s restrictive household registration (hukou) system. The impact of market access on this disparity varies across regions. Using China Income Project data from 1995 and 2002, we find that a 1 % increase in market access increases the rural-urban higher education gap by 1.2 percentage points. The findings suggest that hukou reform alone will not reduce educational inequality without addressing the land-use issues linked to hukou policies.