Education Decisions and Chinese Household Finance

Open Access
Pihl, Matthew Gregory
Area of Honors:
Interdisciplinary in Economics and Finance
Bachelor of Science
Document Type:
Thesis Supervisors:
  • Russell Wade Cooper, Thesis Supervisor
  • Russell Paul Chuderewicz, Honors Advisor
  • Brian Spangler Davis, Honors Advisor
  • finance
  • economics
  • China
  • stocks
  • higher education
Does increased higher education attainment among Chinese households cause greater stock market participation rates? In this paper, a three-period, lifetime model is constructed to explain data facts about household finance and education outcomes in rural and urban China. Utility-maximizing functions are compared to evaluate households’ optimal education and investment strategies. Stock market entry costs are estimated as inverse functions of household ability, a heterogeneous parameter. Based on this estimated model, we conclude that higher, average household disposable incomes in urban Chinese regions cause their greater stock market participation rates. Additionally, more-educated Chinese households in both regions generally have lower stock market entry costs and therefore gain easier access to stock markets.