How Neighborhood Influences Shape College Choices and Academic Paths for Students: Insights from Croatia

Choosing a university and field of study is a key life decision that influences one’s lifelong earnings trajectory. Data shows that the share of individuals going to university is unequally distributed, and is lower among disadvantaged students. High-achieving students who are low income are less likely to opt for ambitious education paths, despite the high returns of education. Even among those students who decide to apply for college, the likelihood of whether they will apply to prestigious colleges or renowned study programs differs along the distribution of socioeconomic background. It does not only matter if  you study, but also what and where you study, as there is a large variation in long-run outcomes, such as earnings, both between universities as well as between fields of study. Part of this mismatch can be attributed to unequal starting points for children, in terms of both institutional settings and the quality of information available within their close networks.

Equality of opportunity is a key topic in the literature on education. There is general agreement that individuals from different neighborhoods and backgrounds should have access to equal education opportunities; but in many countries and regions, even across the developed world, this is still not the case. It matters where you come from, even if, in theory, the options are the same.

In our working paper, we investigate neighbor spillovers on specific college × major choices. Using a regression discontinuity design to estimate neighbor effects on college major choices, we provide causal evidence that older neighbors’ enrollment in a specific program has a spillover effect on younger students’ decisions. Using the universe of high school and college admissions data in Croatia, we geocoded nearly 500,000 students’ residential addresses to investigate how their college and major choices are influenced by older neighbors and peers.

Key Findings

We find that an older neighbors’ enrollment in a particular program increases the younger neighbor’s probability, evaluated at the sample mean, to apply for the same program—as their first preference by 23%, as one of their top three by 13-15%, and to apply to the program at all by 14%. We further disentangle the possible mechanisms of the effect, first finding that younger female students seem to be influenced more strongly than male students by an older neighbor’s enrollment in a program, and that older male neighbors seem to have a stronger influence than older female neighbors on younger students. 

Next, we find that students who live in cities without a university see a 37% increase in the probability, evaluated at the sample mean, that they will apply for a program their older neighbor enrolled in, while for students living near a university there is no significant effect. This finding suggests a higher value of access to information in rural areas; whether this is through an aspiration effect or a pure information channel is still an open question. 

Finally, we find that younger neighbors follow their older neighbors to elite programs or programs with more challenging enrollment requirements. The last two findings suggest that the scarcity of information in rural areas matters, and that it matters even more if students can observe an older neighbor who has managed to enroll in an elite program.

Next, we utilize the variation in study program weight schemes across Croatia´s college system to identify the causal effect of older neighbors´ admission to a college program on younger neighbors’ human capital formation. After the older neighbor peer is admitted to a particular study program, younger neighbor peers tend to increase their grades in subjects needed to get into that college program relatively more than they do for the rest of their control group subjects. The effect is stronger as the share of the weight placed on that particular subject in admissions increases. We show that younger neighbor peers learn the information about the specific subjects they need to excel in order to increase their probability of admission to their older neighbor´s college program. Whether this is a direct effect, via the older neighbors interacting with the younger ones, or an indirect effect, through aspiration, in which the older neighbor´s admission motivates the younger neighbor to learn more about the admission process and consequently study more, is still an open question.

We show that information networks, which have been examined in previous studies, reach beyond just family networks. This is substantial from a policy perspective, as interventions to increase college enrollment and choices could have a multitude of effects beyond family boundaries. It is important to consider the potential channel of individual neighbor spillovers in educational trends, especially for places or regions where access to information is scarce. Neighborhoods matter, but in rural areas or regions where institutional settings are generally sparse, a few individuals could have a large impact on perceived and realized opportunities by those within their network when it comes to education and human capital formation.