IDEAS home Printed from https://ideas.repec.org/a/eee/chieco/v73y2022ics1043951x22000499.html
   My bibliography  Save this article

Heterogeneous firm responses to increases in high-skilled workers: Evidence from China's college enrollment expansion

Author

Listed:
  • Feng, Shuaizhang
  • Xia, Xiaoyu

Abstract

Over the past several decades, the returns to college education have steadily increased in many countries of the world despite an increased supply of college graduates. In this paper, using local-labor market data on the composition of the labor force combined with detailed firm-level data covering the period of a large-scale expansion of college enrollment in China, we seek to identify within-firm adjustments to labor market changes. The empirical work is guided by a model in which there are two types of production technologies, characterized by two different types of capitals, one skill-biased and the other labor-biased. The empirical results, consistent with the model and the observed trends in schooling and rates of return, indicate that there were significant adjustments in capital and R&D within-firms in response to an enlarged college-educated labor force.

Suggested Citation

  • Feng, Shuaizhang & Xia, Xiaoyu, 2022. "Heterogeneous firm responses to increases in high-skilled workers: Evidence from China's college enrollment expansion," China Economic Review, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:chieco:v:73:y:2022:i:c:s1043951x22000499
    DOI: 10.1016/j.chieco.2022.101791
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1043951X22000499
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.chieco.2022.101791?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ian Walker & Yu Zhu, 2008. "The College Wage Premium and the Expansion of Higher Education in the UK," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(4), pages 695-709, December.
    2. José De Gregorio & Jong–Wha Lee, 2002. "Education and Income Inequality: New Evidence From Cross‐Country Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 48(3), pages 395-416, September.
    3. Nicholas Bloom & Mirko Draca & John Van Reenen, 2016. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(1), pages 87-117.
    4. Antonio Ciccone & Giovanni Peri, 2006. "Identifying Human-Capital Externalities: Theory with Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(2), pages 381-412.
    5. Pedro Carneiro & Kai Liu & Kjell Salvanes, 2018. "The Supply of Skill and Endogenous Technical Change: Evidence From a College Expansion Reform," Working Papers 2018-041, Human Capital and Economic Opportunity Working Group.
    6. David Card & Thomas Lemieux, 2001. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(2), pages 705-746.
    7. Arnaud Chevalier & Colm Harmon & Ian Walker & Yu Zhu, 2004. "Does Education Raise Productivity, or Just Reflect it?," Economic Journal, Royal Economic Society, vol. 114(499), pages 499-517, November.
    8. Angel de la Fuente & Rafael Doménech, 2006. "Human Capital in Growth Regressions: How Much Difference Does Data Quality Make?," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 1-36, March.
    9. Alan B. Krueger, 1993. "How Computers Have Changed the Wage Structure: Evidence from Microdata, 1984–1989," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(1), pages 33-60.
    10. Li, Hongbin & Ma, Yueyuan & Meng, Lingsheng & Qiao, Xue & Shi, Xinzheng, 2017. "Skill complementarities and returns to higher education: Evidence from college enrollment expansion in China," China Economic Review, Elsevier, vol. 46(C), pages 10-26.
    11. Feng, Shuaizhang & Hu, Yingyao & Moffitt, Robert, 2017. "Long run trends in unemployment and labor force participation in urban China," Journal of Comparative Economics, Elsevier, vol. 45(2), pages 304-324.
    12. Meng, Xin & Shen, Kailing & Xue, Sen, 2013. "Economic reform, education expansion, and earnings inequality for urban males in China, 1988–2009," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 227-244.
    13. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
    14. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    15. Eli Bekman & John Bound & Stephen Machin, 1998. "Implications of Skill-Biased Technological Change: International Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1245-1279.
    16. Falvey, Rod & Greenaway, David & Silva, Joana, 2010. "Trade liberalisation and human capital adjustment," Journal of International Economics, Elsevier, vol. 81(2), pages 230-239, July.
    17. Nicola Gennaioli & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2013. "Human Capital and Regional Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(1), pages 105-164.
    18. Krugman, Paul R., 2000. "Technology, trade and factor prices," Journal of International Economics, Elsevier, vol. 50(1), pages 51-71, February.
    19. Angrist, Joshua D, 1995. "The Economic Returns to Schooling in the West Bank and Gaza Strip," American Economic Review, American Economic Association, vol. 85(5), pages 1065-1087, December.
    20. O. Ashenfelter & D. Card (ed.), 1999. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 3, number 3.
    21. Barro, Robert J. & Lee, Jong-Wha, 1994. "Sources of economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 1-46, June.
    22. repec:wyi:journl:002165 is not listed on IDEAS
    23. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    24. Chinhui Juhn & Dae Il Kim & Francis Vella, 2005. "The Expansion of College Education in the United States: Is There Evidence of Declining Cohort Quality?," Economic Inquiry, Western Economic Association International, vol. 43(2), pages 303-315, April.
    25. Daron Acemoglu, 2007. "Equilibrium Bias of Technology," Econometrica, Econometric Society, vol. 75(5), pages 1371-1409, September.
    26. Duffy, John & Papageorgiou, Chris, 2000. "A Cross-Country Empirical Investigation of the Aggregate Production Function Specification," Journal of Economic Growth, Springer, vol. 5(1), pages 87-120, March.
    27. Yi Che & Lei Zhang, 2018. "Human Capital, Technology Adoption and Firm Performance: Impacts of China's Higher Education Expansion in the Late 1990s," Economic Journal, Royal Economic Society, vol. 128(614), pages 2282-2320, September.
    28. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
    29. Brandt, Loren & Van Biesebroeck, Johannes & Zhang, Yifan, 2012. "Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing," Journal of Development Economics, Elsevier, vol. 97(2), pages 339-351.
    30. Nicole M. Fortin, 2006. "Higher-Education Policies and the College Wage Premium: Cross-State Evidence from the 1990s," American Economic Review, American Economic Association, vol. 96(4), pages 959-987, September.
    31. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    32. Susana Iranzo & Giovanni Peri, 2009. "Schooling Externalities, Technology, and Productivity: Theory and Evidence from U.S. States," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 420-431, May.
    33. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1055-1089.
    34. Paul Beaudry & Mark Doms & Ethan Lewis, 2010. "Should the Personal Computer Be Considered a Technological Revolution? Evidence from U.S. Metropolitan Areas," Journal of Political Economy, University of Chicago Press, vol. 118(5), pages 988-1036.
    35. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863, Elsevier.
    36. K. Sato, 1967. "A Two-Level Constant-Elasticity-of-Substitution Production Function," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(2), pages 201-218.
    37. Li, Shi & Whalley, John & Xing, Chunbing, 2014. "China's higher education expansion and unemployment of college graduates," China Economic Review, Elsevier, vol. 30(C), pages 567-582.
    38. Loren Brandt & Johannes Van Biesebroeck & Luhang Wang & Yifan Zhang, 2017. "WTO Accession and Performance of Chinese Manufacturing Firms," American Economic Review, American Economic Association, vol. 107(9), pages 2784-2820, September.
    39. Claudia Goldin & Kenneth Sokoloff, 1984. "The Relative Productivity Hypothesis of Industrialization: The American Case, 1820 to 1850," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 461-487.
    40. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
    41. Ethan Lewis, 2013. "Immigration and Production Technology," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 165-191, May.
    42. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    43. Stephen Machin & John Van Reenen, 1998. "Technology and Changes in Skill Structure: Evidence from Seven OECD Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1215-1244.
    44. Stokey, Nancy L, 1996. "Free Trade, Factor Returns, and Factor Accumulation," Journal of Economic Growth, Springer, vol. 1(4), pages 421-447, December.
    45. Claudia Goldin & Lawrence F. Katz, 1998. "The Origins of Technology-Skill Complementarity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 693-732.
    46. Christian Dustmann & Albrecht Glitz, 2015. "How Do Industries and Firms Respond to Changes in Local Labor Supply?," Journal of Labor Economics, University of Chicago Press, vol. 33(3), pages 711-750.
    47. Paul Goldsmith-Pinkham & Isaac Sorkin & Henry Swift, 2020. "Bartik Instruments: What, When, Why, and How," American Economic Review, American Economic Association, vol. 110(8), pages 2586-2624, August.
    48. Gregory C. Chow, 1993. "Capital Formation and Economic Growth in China," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 809-842.
    49. Daron Acemoglu, 2003. "Patterns of Skill Premia," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 199-230.
    50. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
    51. Ethan Lewis, 2011. "Immigration, Skill Mix, and Capital Skill Complementarity," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(2), pages 1029-1069.
    52. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xianbo Li, 2022. "Sequence Model and Prediction for Sustainable Enrollments in Chinese Universities," Sustainability, MDPI, vol. 15(1), pages 1-25, December.
    2. Xu, Tao & Zhu, Weiwei, 2021. "Eudemonia and Freedom: A Bibliometric Research on Frontiers and Evolution of Labour and Employment in China," MPRA Paper 112908, University Library of Munich, Germany, revised 30 Mar 2022.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shuaizhang Feng & Xiaoyu Xia, 2018. "Endogenous skill-biased technology adoption: Evidence from China's college enrollment expansion program," Working Papers 2018-099, Human Capital and Economic Opportunity Working Group.
    2. Caselli, Francesco & Ciccone, Antonio, 2013. "The contribution of schooling in development accounting: Results from a nonparametric upper bound," Journal of Development Economics, Elsevier, vol. 104(C), pages 199-211.
    3. Angel de la Fuente & Antonio Ciccone, 2003. "Human capital in a global and knowledge-based economy," UFAE and IAE Working Papers 562.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    4. Lewis, Ethan & Peri, Giovanni, 2015. "Immigration and the Economy of Cities and Regions," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 625-685, Elsevier.
    5. Nicola Gennaioli & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2013. "Human Capital and Regional Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(1), pages 105-164.
    6. Nico Voigtlaender, 2009. "Many Sectors Meet More Skills: Intersectoral Linkages and the Skill Bias of Technology," 2009 Meeting Papers 1136, Society for Economic Dynamics.
    7. Pedro Carneiro & Kai Liu & Kjell Salvanes, 2018. "The Supply of Skill and Endogenous Technical Change: Evidence From a College Expansion Reform," Working Papers 2018-041, Human Capital and Economic Opportunity Working Group.
    8. Hu, Chenxu & Bollinger, Christopher, 2021. "Effects of cohort size on college premium: Evidence from China's higher education expansion," China Economic Review, Elsevier, vol. 70(C).
    9. Wenchao Jin, 2022. "Occupational polarisation and endogenous task-biased technical change," Working Paper Series 0622, Department of Economics, University of Sussex Business School.
    10. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    11. Giovanni Peri & Kevin Shih & Chad Sparber, 2016. "STEM Workers, H-1B Visas, and Productivity in US Cities," World Scientific Book Chapters, in: The Economics of International Migration, chapter 9, pages 277-307, World Scientific Publishing Co. Pte. Ltd..
    12. Carlos Medina & Christian Posso, 2010. "Technical Change and Polarization of the Labor Market: Evidence for Brazil, Colombia and Mexico," Borradores de Economia 614, Banco de la Republica de Colombia.
    13. Richard Blundell & David A. Green & Wenchao (Michelle) Jin, 2016. "The UK wage premium puzzle: how did a large increase in university graduates leave the education premium unchanged?," IFS Working Papers W16/01, Institute for Fiscal Studies.
    14. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2017. "Innovations, growth and participation in advanced economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 14(2), pages 293-351, April.
    15. Kerekes, Monika, 2007. "Analyzing patterns of economic growth: a production frontier approach," Discussion Papers 2007/15, Free University Berlin, School of Business & Economics.
    16. Bibhudutta Panda, 2017. "Schooling and productivity growth: evidence from a dual growth accounting application to U.S. states," Journal of Productivity Analysis, Springer, vol. 48(2), pages 193-221, December.
    17. Gallego, Francisco A., 2012. "Skill Premium in Chile: Studying Skill Upgrading in the South," World Development, Elsevier, vol. 40(3), pages 594-609.
    18. Li, Hongbin & Li, Lei & Ma, Hong, 2022. "China's skill-biased imports," China Economic Review, Elsevier, vol. 74(C).
    19. Frédéric Docquier & Joël Machado & Khalid Sekkat, 2015. "Efficiency Gains from Liberalizing Labor Mobility," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(2), pages 303-346, April.
    20. Michal BURZYŃSKI & Christoph DEUSTER & Frédéric DOCQUIER, 2018. "The Geography of Talent: Development Implications and Long-Run Prospects," Working Papers P221, FERDI.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:chieco:v:73:y:2022:i:c:s1043951x22000499. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/chieco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.