We exploit historical natural experiments to test whether universities increase economic mobility and equality. We use "runner-up’" counties that were strongly considered to become university sites but were not selected for as-good-as-random reasons as counterfactuals for university counties. University establishment causes greater intergenerational income mobility but also increases cross-sectional income inequality. We highlight four findings to explain this seeming paradox: universities hollow out the local labor market and provide greater opportunities to achieve top incomes, both of which increase cross-sectional inequality, and increase educational attainment and connections to high-SES people, which prevent inequality from perpetuating into intergenerational immobility.
Post-secondary educational attainment; inequality
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