Education and consumption: Evidence from migrants in Chinese cities

We utilise the implementation of the 1986 Compulsory Education Law in China as a natural experiment to examine the causal impact of educational attainment on consumption among domestic migrants in Chinese cities. Using data from the 2017 China Migrants Dynamic Survey, results based on the instrumental variable and difference-in-differences estimators, which correct for endogeneity, suggest that having one additional year of education generates an approximately seven percentage-point increase in adult-equivalent monthly household consumption expenditure per capita. Educational attainment also contributes to consumption inequality in the migrant population. We find that the positive effects of educational attainment on consumption are higher among those with higher income and are lower among those who are females, in a larger household, in a household with a non-adult member, rural migrants, self-employed and older than 45. We also find that migrants' social participation, social engagement, risk preference and permanent settlement intentions partially mediate the relationship between education and consumption.