The Human Capital Effect of City Size: Through the Lens of Adolescents’Cognitive Ability

【Authors】

SUN Sanbai, LI Yaqin & ZHAO Xiuyin

【WorkUnit】

SUN Sanbai, LI Yaqin（Renmin University of China, 100872）；ZHAO Xiuyin（China Development Bank, 518033）

【Abstract】

While existing urban economics literature focuses on productivity gains, wage premiums, and skill agglomeration among adults, this study examines an important but understudied dimension of human capital externalities: How city size influences adolescents’ cognitive ability and how the urban environment shapes adolescents’ long-term cognitive outcomes. The study is motivated by two realities. First, China’s rapid urbanization has produced stark inequalities in educational resources across cities. Second, with the demographic dividend diminishing, it is imperative to better understand how the city size can generate talent dividends. The paper applies a new human capital framework, emphasizing cognitive ability as a core component of long-term productivity and mobility.
Using data from the China Family Panel Studies （CFPS, 2010-2018） linked with city-level statistics, the study estimates a series of OLS and IV models. Cognitive ability is measured through standardized scores on word and math tasks, and city size is proxied by total urban population. Mechanism analysis and interaction terms further test heterogeneity and causal pathways.
The research results find that adolescents raised in larger cities perform significantly better on cognitive tests. These benefits are especially pronounced among children from low-skilled or low-income households and among non-migrant （local） children. By contrast, the effect is weaker or non-significant for migrant or boarding children, likely due to institutional barriers that limit access to public education in large cities. Mechanism tests confirm that both municipal educational investment and household spending mediate these effects. Moreover, city size helps reduce the intergenerational transmission of low cognitive ability and leads to higher income and educational returns in adulthood.
This study contributes to the literature in three ways. First, it highlights adolescence as a key stage for urban human capital externalities. Second, it operationalizes cognitive ability as a core outcome of urban scale effects. Third, it addresses equity issues by examining heterogeneous effects on disadvantaged populations.
It proposes urgent and actionable policy recommendations: expanding access to education in large cities, especially for migrant and rural-origin children, reforming the hukou system to reduce institutional exclusion, and ensuring more equitable distribution of public educational investment. Future research could explore effects on non-cognitive skills （e.g., motivation, resilience）, cross-national comparisons, or intra-city spatial mismatches to further understand how urban environments shape human capital development.

JEL: R23, J24, I24

【KeyWords】

City Size, Cognitive Ability, Human Capital Externalities, Floating Population