Should I stay or should I go? Neighbors' effects on university enrollment

This paper investigates whether the decision to attend university depends on university enrollment of close neighbors. I create a unique dataset combining detailed geographic information and educational records from different public agencies in Chile, and exploit the quasi-random variation generated by the rules that determine eligibility for student loans. I find that close neighbors have a large and significant impact on university enrollment of younger applicants. Potential applicants are around 11 percentage points more likely to attend university if a close neighbor enrolled the year before. This effect is particularly strong in areas with low exposure to university and among individuals who are more likely to interact; the effect decreases both with geographic and social distance and is weaker for individuals who have spent less time in the neighborhood. I also show that the increase in university attendance translates into retention and university completion. These effects are mediated by an increase in applications rather than by an improvement on applicants' academic performance. This set of results suggests that policies that expand access to university generate positive spillovers on close peers of the direct beneficiaries.