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Does Experience Still Pay? Evidence from Competitive and Institutional Labor Markets

Author

Listed:
  • Li, Shikai
  • Chen, Jie

Abstract

Standard human capital theory predicts a positive, concave experience-wage relationship. Using repeated cross-sectional data from China (2010-2023), we document a structural breakdown of this canonical Mincer profile by 2023, as aggregate returns to experience become statistically insignificant. This aggregate collapse conceals a sharp institutional divergence. In competitive markets, late-career experience returns turn negative. Conversely, institutional sectors-specifically state-owned enterprises and politically connected employment-maintain stable positive returns. These findings suggest that during rapid technological change, experience premiums are increasingly governed by institutional wage-setting mechanisms rather than uniform market productivity.

Suggested Citation

  • Li, Shikai & Chen, Jie, 2026. "Does Experience Still Pay? Evidence from Competitive and Institutional Labor Markets," GLO Discussion Paper Series 1759, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1759
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    Keywords

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    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • 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

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