This study investigates the impact of internal migrant children on human capital investments among local households in urban China. Using a nationally representative survey and leveraging random student-classroom assignment in middle schools, the researchers find that a higher proportion of migrant children in a class positively correlates with increased educational spending by local families, particularly on out-of-school education. This effect is more pronounced among male students, ninth graders, and those from high socioeconomic status families. The mechanism analysis suggests this is driven by local parents overestimating their children's academic performance and harboring unfounded concerns about negative peer effects, rather than actual impacts on learning environment or academic achievement.

Xiaodong Zheng, Yanran Zhou