Regulating Private Tutoring: Human Capital Formation, Inequality, and Intergenerational Mobility

This paper develops a quantitative partial-equilibrium overlapping-generations model to study how private tutoring regulation affects human capital formation, household welfare, educational inequality, and intergenerational mobility. The analysis is motivated by a broader development-economics concern: how unequal access to complementary educational investment interacts with competitive education systems to shape the intergenerational distribution of economic opportunities. The model features heterogeneous households, endogenous ranking-based college admission, and intergenerational human capital transmission. Private tutoring can affect exam performance and productive human capital differently, which allows the analysis to distinguish its competitive and productive roles. Calibrated to Chinese microdata and reduced-form empirical evidence, the model is used as a benchmark quantitative exercise to compare a complete ban, a ban with imperfect enforcement and black-market tutoring, and a welfare-selected tutoring tax that partly finances public education. In the benchmark calibration, a complete ban generates large model-implied welfare and human-capital losses, especially when tutoring contributes to productive skills. Imperfect enforcement preserves part of tutoring activity but can widen group differences in access when informal tutoring costs vary across household types. Among the specific policy experiments considered, the tutoring tax performs better than prohibition-based policies while keeping mean child human capital close to the baseline. This ranking is conditional on the assumed enforcement and public-financing arrangements. The results highlight how education regulation, household heterogeneity, and public-finance design interact in shaping human-capital accumulation and inequality.