How Addressing Inter-School Disparities Unleashes Household Consumption?

【Authors】

ZHAO Nan, YAN Ruiwen & LIU Zhuo

【WorkUnit】

ZHAO Nan, YAN Ruiwen & LIU Zhuo (Beijing Normal University, 100875)

【Abstract】

Household consumption is a key driver of economic growth. Given China’s insufficient effective domestic demand, how to stimulate consumption has attracted extensive attention from academia and society. Substantial research has been conducted on this issue from both macro and micro perspectives. As an important institutional guarantee for basic livelihood and development, social public services are widely recognized to boost household consumption propensity by reducing uncertainty-driven expenditures and precautionary savings. Yet existing studies have primarily focused on healthcare and elderly care services, with insufficient attention to the role of public education. 
Advancing the high-quality and balanced development of compulsory education is not only a crucial means to achieve educational equity but also a key channel to ease the financial burden of family education and thereby unlock consumption potential. Against this background, this paper constructs a multi-dimensional index of inter-school educational quality disparity for the first time and systematically measures inter-school gaps in compulsory education at the county level. Using this index, we examine how middle school disparities impact household consumption. The results indicate that a 0.01 decrease in the interschool disparity index at the junior secondary level leads to a 17.034% decrease in household education expenditures, an 11.166% increase in non-education expenditures, and an overall 10.694% increase in total household consumption. After addressing endogeneity using the instrumental variable (IV) method, the results remain robust. Furthermore, the baseline results are consistent across a series of robustness checks. Mechanism analysis reveals that an decrease in middle school disparity increases household consumption by raising household labor supply and income and lowering educational savings. Further analysis reveals that these effects are particularly evident in families where the head is middle-aged or older, has attained only compulsory education, and possesses relatively limited wealth. Moreover, the release of household consumption is mainly concentrated in expenditures on housing, daily necessities, and related services.
This paper makes three main contributions to the literature. First, while national evidence remains scarce on inter-school disparities in compulsory education, this study constructs a multi-dimensional index of inter-school disparities to comprehensively measure such gaps at the county level for the first time. Second, among studies on the determinants of household consumption, few have explored the role of inter-school disparities. Starting with competition for quality educational resources at the primary-to-junior high transition, this study is the first to examine the relationship between the balanced development of compulsory education and household consumption decisions at the micro level. We further analyze the underlying mechanisms through household income and educational savings, and provide new perspectives, theoretical foundations, and empirical evidence for boosting consumption and expanding domestic demand. Third, existing research on the balanced development of education mainly employs descriptive analyses and statistical measurement methods, and lacks comprehensive and practical measurements due to limited data availability. Empirical studies on the relationship between balanced development of education and other economic activities are particularly scarce—a gap this study fills. Overall, this study carries important practical implications for further promoting the high-quality and balanced development of compulsory education, optimizing household consumption decisions, and expanding domestic demand.

JEL: D12, D13, I22

【KeyWords】

Compulsory Education, Middle School Educational Disparities, Household Consumption