How Does the Regional Distribution of Higher Education Shape the Human Capital Landscape?

The geographic distribution of higher education shapes a nation's long-term regional human capital landscape, yet the endogeneity of university location makes causal inference a formidable challenge. This study leverages the 1950s department restructuring in China—a large-scale, policy-driven university relocation—as a natural experiment. By matching historical data with contemporary micro-data, we identify its long-term causal effects on human capital. The findings reveal that university inflow exerted a significant, positive, and remarkably persistent impact on local human capital. The key mechanism lies in a self-reinforcing virtuous cycle: university presence reshapes the supply side through the localized cultivation of talent while simultaneously fostering an industrial and innovative ecosystem that bolsters demand for it. Heterogeneity analysis shows that this positive effect is particularly pronounced in smaller cities and among populations with rural backgrounds. Our evidence suggests that a place-based policy historically aimed at promoting equity can also generate considerable long-term efficiency. This challenges the conventional wisdom of a trade-off between efficiency and equity, demonstrating that a moderately balanced distribution of higher education is an effective strategy for enhancing national human capital and narrowing developmental gaps.