Research

How do future schooling opportunities shape early educational decisions? In this paper, I exploit a large expansion in the supply of free higher education institutions (HEIs) in Brazil to analyze the role of tertiary education opportunities in increasing expected returns to basic schooling in low- and middle-income countries (LMICs). To understand when higher education expansion can increase demand for pre-tertiary schooling, I develop a simple framework that highlights the channels of impact and necessary conditions for downstream effects to occur. I construct a novel dataset on HEI roll-out and combine it with rich administrative data to estimate the effect of receiving an HEI on local public students' pre-college outcomes in a staggered difference-in-differences design. Students in treated municipalities are 2% more likely to graduate from high school and 20% more likely to take a college-entry exam. I show that these effects are driven solely by increased access to higher education rather than by local labor market changes, with local students’ enrollment in federal HEIs increasing by 70% following the policy. Consistent with the framework, empirical evidence supports the prediction that the college premium is key to generating downstream effects: changes in high school graduation are positive only in municipalities with a high pre-policy college premium, and largest where the college premium is high and high school premium is low. Expanding access to higher education in contexts where returns to education are highly convex can be a powerful tool for improving early educational attainment, especially in LMIC settings where stand-alone returns to high school are not enough to keep students in school.