Poster #83 - Identifying Social Returns to Higher Education: Evidence from a Policy-Driven Higher Education Spatial Expansion

• In Event: Friday Poster Reception

Abstract

While a vast literature has established the private wage returns of higher education, the social returns to higher education remain a critical yet under-studied frontier in the economics of education (Barrow & Malamud, 2015). In theory, if education generates positive externalities—such as increased tax revenue and transfers to family members, or improved health outcomes—the social return may exceed the private return, providing a robust normative justification for public subsidies. However, existing causal evidence is surprisingly scarce. Most studies utilizing college proximity as an instrument (Card, 1995; Currie & Moretti, 2003) face challenges because institutional locations are often endogenous to local economic potential. This study addresses a fundamental research question: What are the causal social returns of higher education expansion?We exploit the large-scale, policy-driven expansion of higher education in China as a quasi-experiment. Unlike many Western contexts, China’s expansion—resulting in over 1,600 new campuses since 1999—was largely a state-level policy response to economic restructuring and rising demand for skilled labor, rather than being driven by local economic shocks or individual choices. This design provides a relatively exogenous source of variation in educational opportunities, making it well-suited for causal identification. Using data from the China Household Finance Survey (CHFS), we move beyond conventional measures of private returns to examine a broader set of social outcomes, including labor market participation, civic engagement, and health indicators. We implement a 2SLS framework, instrumenting these outcomes with individual educational attainment to isolate the impact of expanded access to higher education on social well-being while addressing potential endogeneity concerns.Our results provide clear causal evidence for the existence of significant social returns to higher education. First, we confirm that increased geographic access to campuses successfully raised human capital investment. Second, this attainment led to substantial fiscal dividends: we find significant increases in personal income tax and corporate income tax (paid by employers). Third, we identify a “safety net” effect where improved education increases financial transfers to parents, potentially easing the public burden for elderly support. Finally, we find that while higher education significantly reduces public medical expenses, it does not significantly alter specific health behaviors such as drinking and smoking. This suggests that the social return in healthcare is likely driven by improved socio-economic status or efficiency in navigating the health system rather than lifestyle changes—a nuance that challenges simpler human capital models.These findings provide a critical empirical basis for the social benefits of investing in higher education. For policymakers, especially in the developing world, our study suggests that higher education expansion is a high-yield fiscal strategy that promotes long-term budgetary sustainability and strengthens informal social support systems.

Author

• Lu Lin, Peking University
  Presenting Author