Higher Education Supply, Neighbourhood Effects and Economic Welfare
62 Pages Posted: 21 Feb 2019
Date Written: 2019
Abstract
This paper uses our own built historical data for Italy to analyse the effects of the modern supply of higher education institutions on economic welfare, measured in terms of real income per capita. We perform an empirical analysis at the province level implementing a fixed effect instrumental variables estimator for over 150 years. We use as instruments the interaction of the province-level supply of higher education before the Italian political unification with university reforms that occurred in Italian history. We find evidence of displacement forces between institutions in sufficiently close neighbourhoods. We argue that quantifying the cost of such displacement forces is crucial to properly evaluating the welfare effects of higher education institutions. We find that a province exposed to the average supply (measured as the number of local institutions) has a 4:9% higher real income per capita compared to a province with no supply. Once we properly account for the foregone value of displacement forces, we show that economic returns are very localised at the province level.
Keywords: neighbourhood effects, higher education supply, historical data, initial conditions, economic welfare
JEL Classification: I230, I280, N000, R100
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