Has the compulsory school merger program reduced the welfare of rural residents in China?

•The compulsory school merger program in China decreases the rural consumption.•It raises the education expenditure for rural residents.•It further affects rural residents by increasing the schooling distance.

The compulsory school merger program in rural regions of China imposed higher education costs on rural residents, decreased their consumption and reduced their welfare. In this study, we employ household-level data and the difference-in-differences method to analyze the policy effect on residents' consumption and education costs. Our results show that the compulsory school merger program had a negative effect on the consumption of rural residents and inflicted multiple education costs on them. We also find that the increase in the distance between school and home is an important explanation for the effect of this policy on rural residents' education costs.