Does expansion of college education benefit urban entrepreneurship and innovation in China?

It is important to determine whether China's unprecedented expansion of college education (ECE) since 1999 has made a significant impact on the urban entrepreneurship and innovation (E&I). Using the data of 284 cities at the prefecture level and above from 2000 to 2020, this study empirically identifies the average treatment effect (ATE) of China's ECE on the urban E&I with its spatial spillover and explores two mediating channels (i.e., talent accumulation, and labor misallocation) to reveal how China's ECE impacts urban E&I. The results verify that with strong significance and robustness, the ECE for either undergraduates or master's students wholly matter for the E&I of cities, especially cities located in eastern or northeast economic zone，cities with a population less than 5 million or the ones without “Mass Innovation and Entrepreneurship Demonstration Bases”. Meanwhile, both the “Matthew effect” and the spatially “beggar-thy-neighbor” of ATE induced by the ECE are also be confirmed. Arguably, the China's ECE contributes either more talents accumulation or less labor misallocation, thereby furtherly boosting urban E&I. Above results were beneficial, especially at the decision-making for the developing countries to promote urban innovation and entrepreneurship under the scenario of college enrollment expansion.