Does Access to Better Schools Affect Private Expenditure on Children Evidence from China

This paper studies how parental investment in children responds to changes in public education provision. Based on transactions of China UnionPay debit and credit cards, we identify two types of child-related expenditure: extra-curriculum training and other child support. We exploit a quasi-experimental shock on education provision - a merger between two districts (Jing’an and Zhabei) in Shanghai. The merger allows Zhabei students to apply for high schools in Jing’an where more top-tier high schools are located. Using a Difference-in-Differences estimation, we find that relative to a third control district, cardholders in Zhabei spent more on children after the merger. The effect is stronger for cardholders who have children of pre-high-school age and for those who live closer to the old border but disappears for those who have adult children. Lastly, we rule out alternative channels via increased competition and housing appreciation. Overall, our findings suggest that parents spend more on children once educational opportunities improve; thus, equal allocation of public educational resources could encourage private parental investment in children.