How Does Highway Market Access Affect Human Capital Investment? Micro-Level Evidence from China

Does new road connectivity affect schooling and household spending on teenagers’ human capital development? We investigate this issue in the context of China’s expanding highway system. Using spatial-temporal national highway dataset and CFPS data, this paper employs variations in the timing of highway connections to examine the impact of market access on teenagers’ educational investment. Our IV estimate indicates a 10% raise in highway market access decreasing the likelihood of high school attendance by 0.2%. The negative effect is larger for females and individuals located in eastern regions/regions closer to ports. Results are explained by the mechanisms of high opportunity costs of schooling and the increasement in job opportunities for low-skilled workers