How does local education expenditure impact the self-development ability of new citizens? Evidence from China

New citizens are migrants who have moved from rural to urban areas for work and settlement. Enhancing the self-development ability of these migrants is an essential element of urbanization. This paper examines the impact of governmental education expenditure on the self-development ability of new citizens, using panel data from China spanning 2010 to 2020. We find that fiscal expenditure on education can promote the self-development ability of new citizens through three primary channels: improving the public education environment, increasing the supply of vocational education opportunities, and promoting the accumulation of human capital among new citizens. Notably, fiscal spending on preschool education, secondary vocational education, and urban education has a more pronounced effect on the self-development ability of new citizens. Furthermore, fiscal education expenditure significantly benefits new citizens who reside in eastern and western regions, are female, have transitioned to urban hukou, or come from families with higher educational backgrounds. This paper demonstrates the critical need to enhance the positive externalities of education by optimizing public education services and empowering new citizens to develop themselves.