Emigration, Fiscal Spillovers, and Public Education Spending on Rural Schools in China
Prof. Lei Zhang
Professor of Economics, Zhejiang University
This paper investigates how emigration of rural laborers affects public spending on rural schools in the origin regions in China. We build a theoretical model of local government decision-making on education spending facing both traditional and fiscal externalities. The model predicts that per student spending on public schools in origin regions decreases with emigration rate, which is stronger when more children are left-behind. We confirm these hypotheses using an IV estimator with a shift-share instrumental variable. Results are robust to alternative measures of emigration rate and education spending and different sample restrictions. We rule out alternative hypotheses likely consistent with the empirical findings.
