Financial Decentralization and Geographical Stratification of Access to Higher Education in China: The Case of Shanghai

Using a new enrollment dataset of Shanghai public colleges for 2009, we investigate whether the increase in the stratification of Chinese higher education is attributed to the decentralization of higher education finance. We discover that colleges in Shanghai not only admit significantly more in-province students (which we refer to as quantity bias), but also quietly place more out-of-province students, especially those from poor provinces, in low-paying majors (which we refer to as quality bias) when tuition is regulated by the central government. Both types of biases are more obvious in local colleges funded primarily by the Shanghai municipal government than in national colleges jointly funded by central and municipal governments. Our findings provide suggestive evidence that the decentralization of higher education finance in China deeply exacerbates the inequality of higher education opportunities.