How the Availability of Higher Education Affects Incentives? Evidence from Federal University Openings in Brazil

Abstract: This paper studies the impact of an university opening on incentives for human capital accumulation of prospective students in its neighborhood. The opening causes an exogenous fall on the cost to attend university, through the decrease in distance, leading to an incentive to increase effort - shown by the positive effect on students' grades. I use an event study approach with two-way fixed effects to retrieve a causal estimate, exploiting the variation across groups of students that receive treatment at different times - mitigating the bias created by the decision of governments on the location of new universities. Results show an average increase of $0.038$ standard deviations in test grades, for the municipality where the university was established, and are robust to a series of potential problems, including some of the usual concerns in event study models.