Human Capital Consequences of Expanding the Supply of Higher Education Institutions in a Developing Country

Limited post-secondary education infrastructure and opportunities partly explain low higher education attainment in developing countries. This paper estimates the effect of a program that expanded higher education by constructing numerous university campuses across Uruguay. Exploiting temporal and geographic variation in the program’s rollout, we use a dynamic two-way fixed-effects design and comprehensive administrative records to estimate the program’s causal impact. By reducing the distance to the nearest campus, the program increased university enrollment by 34 percent relative to baseline, with especially large gains among less-privileged, first-generation students. Spillovers extend up to 30 kilometers from new campuses, with effects concentrated among students from less-educated families, thereby reducing spatial inequality. We also find that university expansion increased secondary-school enrollment and completion, a relevant result given that low secondary school completion rates remain one of the main barriers to higher education. These improvements occurred without lowering tertiary completion rates. A cost-effectiveness analysis reveals substantial private and social returns, with costs comparable to those of a scholarship program, while reducing spatial inequalities. Overall, the findings suggest that place-based expansion of higher education can reduce spatial inequalities and foster intergenerational mobility in developing countries cost-effectively.