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Endogenous skill-biased technology adoption: Evidence from China’s college enrollment expansion program

Author

Listed:
  • Shuaizhang Feng

    () (Jinan University)

  • Xiaoyu Xia

    () (Chinese University of Hong Kong)

Abstract

China’s college expansion program, which was implemented in 1999 significantly increased the share of college-educated workers in the urban labor force. We find that returns to education were not responsive to changes in local skill supply be- tween then and 2009. To explain the trend, we develop a model of endogenous technology adoption and predict that increasing the share of college-educated work- ers leads firms to adjust their use of production technology. We construct supply shocks in local labor markets based on policy-driven variations in the changes of college enrollment quotas across cities. Using panel data from over 20,000 large manufacturing firms, we find that an enlarged college-educated labor force causes skill-intensive firms to invest more in capital and R&D as well as employ more workers, evidence that supports the theory of endogenous technology adoption.

Suggested Citation

  • 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.
  • Handle: RePEc:hka:wpaper:2018-099
    Note: MIP
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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Feng_Xia_2018_endogenous-skill-biased-tech-adoption.pdf
    File Function: First version, December 19, 2018
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
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    5. 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.
    6. W. Walker Hanlon, 2015. "Necessity Is the Mother of Invention: Input Supplies and Directed Technical Change," Econometrica, Econometric Society, vol. 83, pages 67-100, January.
    7. David Orr, 1999. "Book," Journal of Industrial Ecology, Yale University, vol. 3(4), pages 155-156, October.
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    More about this item

    Keywords

    human capital; endogenous technology adoption; college education; Chinese economy;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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