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Skill complementarities and returns to higher education: Evidence from college enrollment expansion in China

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  • Li, Hongbin
  • Ma, Yueyuan
  • Meng, Lingsheng
  • Qiao, Xue
  • Shi, Xinzheng

Abstract

We find that the increased supply of college graduates resulting from college enrollment expansion in China increases college premiums for older cohorts and decreases college premiums for younger cohorts. This finding is inconsistent with the canonical model that assumes substitution among workers of different ages. We subsequently build a simple model that considers complementarities among workers of different ages and different skill levels. Our model predicts that the college premium of senior workers increases with the supply of young college graduates when skill is a scarce resource. The model's predictions are supported by empirical tests.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:chieco:v:46:y:2017:i:c:p:10-26
    DOI: 10.1016/j.chieco.2017.08.004
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    More about this item

    Keywords

    Skill complementarity; College premium; College enrollment expansion;
    All these keywords.

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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