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Title page

Contents

Abstract 3

1. Introduction 4

2. The reform of the hukou system in China 7

2.1. The hukou system and urban-rural education divide 7

2.2. The hukou reform in 1998 10

3. Data and key variables 12

3.1. Data 12

3.2. Key variables 14

4. Empirical strategies 18

4.1. Difference-in-differences model 18

4.2. Event study 19

5. Results 21

5.1. Baseline results 21

5.2. Validity of DID strategy and dynamic effect 25

6. Robustness checks, heterogenous effects, and mechanisms 27

6.1. Controlling for confounding factors 27

6.2. Other robustness checks 30

6.3. Heterogeneous effects 31

6.4. Mechanisms 33

7. Conclusions 36

References 38

Appendix 57

Tables

TABLE 1. SPECIFIC RULES FOR THE HUKOU REFORM IN 1998 48

TABLE 2. SUMMARY STATISTICS 49

TABLE 3. EFFECTS OF THE REFORM ON HUKOU STATUS 50

TABLE 4. EFFECTS OF THE REFORM ON EDUCATIONAL OUTCOMES 51

TABLE 5. EFFECTS OF THE REFORM ON EDUCATIONAL OUTCOMES WITH LARGE OR SMALL URBAN-RURAL EDUCATION GAP 52

TABLE 6. ROBUSTNESS CHECKS: CONFOUNDING FACTORS 53

TABLE 7. ROBUSTNESS CHECKS: OTHERS 54

TABLE 8. HETEROGENEOUS EFFECTS 55

TABLE 9. MECHANISM ANALYSIS 56

Figures

Figure 1. The urban-rural education gap in China. Panel A illustrates the urban-rural gap in enrollment rates. The enrollment rate is the proportion... 41

Figure 2. The urban-rural gap in education expenditure per student in China, 1998-2018. The rural-urban ratio is the relative value of rural education expenditure... 42

Figure 3. The educational outcomes of children from different family types. The x-axis indicates an individual's birth year, and the y-axis indicates the mean... 43

Figure 4. The effect of the 1998 reform on children's hukou status. The sample comprises individuals from households with urban fathers and rural mothers.... 44

Figure 5. The event study of the reform in 1998. The figure reports the estimates of timing dummies with a 95% confidence interval in the regression... 45

Figure 6. Estimated coefficients from the time-shifted placebo tests. The solid lines denote the true treatment effects estimated by equation (1).... 46

Figure 7. Estimated coefficients from the placebo tests using untreated samples. The solid lines denote the true treatment effects estimated by equation (1).... 47

Appendix Tables

TABLE A1. POLICY ISSUE DATE AND THE FIRST AFFECTED COHORT 57

TABLE A2. COMPOSITION OF FAMILY TYPES 58

TABLE A3. SAMPLE SCREENING PROCESS 59

TABLE A4. COMPARISON OF CHILDREN BORN BEFORE THE REFORM 60

TABLE A5. EFFECTS OF THE REFORM ON EDUCATIONAL OUTCOMES WITH MATCHED SAMPLES 61

TABLE A6. DEMOGRAPHIC CHARACTERISTICS 62