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Since 1999, China has implemented an educational policy of expanding enrollment in universities, which may lead to two opposite effects on income disparity. On the one hand, educational expansion increases the overall number of university students, which may result in a higher proportion of the employment of highly educated people in the total employment of people with education at all levels. Thus, it can narrow the income gap. On the other hand, educational expansion may lead to a decline in the rate of return on higher education, and families in less developed regions are more sensitive to it. As a result, university expansion appears to reduce the proportion of university students from poorer areas and broaden income gap. This paper aims to use a micro data of China Health and Nutrition Survey (CHNS) to study the effect of educational expansion on educational attainment of students from cities in different hierarchy and further test its impact on income disparity. The results show that educational expansion increases educational attainment in China, thereby reducing the income disparity; From the perspective of different urban hierarchy, because of the educational expansion policy, educational attainment in Beijing, Tianjin and Shanghai is far higher than that in other provincial capitals and prefecture-level cities. The higher the urban hierarchy, the greater the income disparity reduced by educational attainment.

Higher Educational Expansion Policy, Educational Attainment and Urban Income Disparity: Evidence from China