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Effects of cohort size on college premium: Evidence from China's higher education expansion

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  • Hu, Chenxu
  • Bollinger, Christopher

Abstract

In this paper, we document the lesser-known heterogeneous trends of college/non-college earnings premium across age groups from 1995 to 2013 in China. Specifically, the college premium in 2013 for the younger group (age 25–34) was about 30 percentage points, similar to the level in 1995, while the college premium in 2013 for the older group (age 45–54) increased to 50 percentage points, nearly double that of 1995. To attribute these divergent trends of the college premium to the changes in the relative size of college workers, we use the model by Card and Lemieux (2001), which incorporates imperfect substitution between similarly educated workers in different age cohorts. Due to the distinctions of these trends in China, our identification is free of the overestimation issue that the existing studies suffer. Our results are similar to those in the U.S., U.K., Canada, and Japan. Holding the age cohort and survey year constant, a one unit increase in log relative size of college workers is associated with about 10 percentage points decrease in college/non-college premium and about 18 percentage points decrease in college/high school premium. We further find that the negative effect is much more substantial among the new entrants (age 25–29) than experienced workers (age 30–54). By this pattern, we demonstrate that the new labor market entrants are more sensitive to their own cohort size and argue that the confounding ability composition effect should not be a serious issue.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:chieco:v:70:y:2021:i:c:s1043951x21001188
    DOI: 10.1016/j.chieco.2021.101700
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    Cited by:

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    2. Sun, Shengmin & Chen, Jiawei & Chen, Jiaying, 2023. "Cohort crowding in education and employment: Evidence from China's compulsory education law," Journal of Economic Behavior & Organization, Elsevier, vol. 210(C), pages 391-411.
    3. Duan, Yide & Zhang, Haotian & Wang, Wenfu & Ao, Xiaoyan, 2022. "The effects of China's higher education expansion on urban and rural intergenerational mobility," China Economic Review, Elsevier, vol. 73(C).
    4. Bollinger, Christopher & Ding, Xiaozhou & Lugauer, Steven, 2022. "The expansion of higher education and household saving in China," China Economic Review, Elsevier, vol. 71(C).
    5. Hao, Zedong & Wang, Yun, 2022. "Education signaling, effort investments, and the market's expectations: Theory and experiment on China's higher education expansion," China Economic Review, Elsevier, vol. 75(C).
    6. Elsayed, Ahmed & Shirshikova, Alina, 2023. "The women-empowering effect of higher education," Journal of Development Economics, Elsevier, vol. 163(C).

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    More about this item

    Keywords

    College premium; Cohort size effect; Trends; Imperfect substitution;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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