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Educational resources are distributed unevenly across space and could contribute to spatial inequality. We develop a dynamic spatial model with life-cycle elements to study the impacts of location-specific educational resources.
In the model, individuals determine whether and where to attend college, weighing on the distance to home, the expected option value of education, the college seats, and the quota available in the destination. Locations with more colleges attract more students. Moreover, as mobility costs increase with age, many college graduates stay in the city of their alma mater, leading to long-term changes in skill composition.
We quantify the model in the context of China and model the merit-based admission process. We show that the college expansion between 2005 and 2015 had moderate impacts on welfare and skill composition, as it diverts resources towards the locations already well-endowed with colleges. A more equitable distribution of admission quotas—or the complete removal of the quota system—could simultaneously enhance aggregate welfare and reduce spatial inequality. |
