What Can Students Gain from China's Higher Education?

China's higher education system has undergone a rapid expansion over the last two decades. By drawing on hand-collected data, we explore students' experiences in college and in the labor market post-graduation in the wake of this expansion. According to our data, the largest employer of college graduates in the labor market was the state sector, followed by the domestic private sector. To explain the returns to college education in China, we explore three mechanisms: human capital, social networks, and signaling. We find that human capital measures, apart from a student's college English test scores, cannot explain the college wage premium, whereas both social networks (for example, membership of the Communist Party) and signaling matter significantly. This seems to indicate that in China, connections are crucial for student success in the labor market, whereas the higher education system itself is more a system for selecting talented individuals than it is for educating them. Finally, students allocate their time accordingly, for example, by spending more time studying English in college than any other subject.     

Dynamics in transitory and permanent variation of wages in Germany

We employ covariance structure models to decompose the cross-sectional variance of male wages in Germany into its permanent and transitory parts. We find that the steep growth of cross-sectional inequality during the early 2000s is predominantly driven by transitory factors.     

Equilibrium unemployment with outsourcing and wage solidarity under labour market imperfections

We evaluate the effects of outsourcing and wage solidarity on wage formation and equilibrium unemployment in a heterogeneous labour market, where wages are determined by a monopoly labour union. We find that outsourcing promotes the wage dispersion between the high- and low-skilled workers. When the labour union adopts a solidaristic wage policy, it will dampen this tendency. Further, higher outsourcing will increase equilibrium unemployment among the high-skilled workers, whereas it will reduce it among the low-skilled workers. Overall, outsourcing will reduce economy-wide equilibrium unemployment under the reasonable condition that the proportion of high-skilled workers is sufficiently low.     

Post‐secondary education in Canada: can ability bias explain the earnings gap between college and university graduates?

Abstract .  Using the Canadian General Social Survey we compute returns to post-secondary education relative to high school. Unlike previous research using Canadian data, our data set allows us to control for ability selection into higher education. We find strong evidence of positive ability selection into all levels of post-secondary education for men and weaker positive selection for women. Since the ability selection is stronger for higher levels of education, particularly for university, the difference in returns between university and college or trades education decreases slightly after accounting for ability bias. However, a puzzling large gap persists, with university-educated men still earning over 20% more than men with college or trades education.     

Parameter estimates comparison of earnings functions in the PSID and CPS data, 1976–2007

Comparing earnings equations in the Panel Study of Income Dynamics (PSID) and the Current Population Survey, we find that the PSID considerably underestimates the returns to education during the 1992–2007 period. Non-random selection in the PSID sample appears to be the reason.     

The welfare costs of union wage compression

This paper calculates the quantitative significance of the welfare costs of union wage compression. This is done in a dynamic general equilibrium model with overlapping generations where agents choose both schooling (human capital) and assets (physical capital). The labor market in this model is characterized as a right-to-manage contract, which allows unions to compress wage differentials between high- and low-skilled workers, by implementing a binding minimum wage. This paper shows that when labor markets are competitive even low levels of wage compression lead to large welfare losses, since wage compression creates costly unemployment among low-skilled workers. The effect of wage compression on the supply of skilled labor, however, is rather small, since the disincentive effect of a lower, high-skilled wage is, to a large extent, offset by a lower opportunity cost of schooling due to higher unemployment.     

Does Raising the Minimum Wage Help the Poor?*

What is the impact of raising the minimum wage on family incomes? Using data from the 1994–1995 to 2002–2003 Survey of Income and Housing, the characteristics of low-wage workers are analysed. Those who earn near-minimum wages are disproportionately female, unmarried and young, without postschool qualifications and overseas born. About one-third of near-minimum-wage workers are the sole worker in their household. Due to low labour force participation rates in the poorest households, minimum-wage workers are most likely to be in middle-income households. Under plausible parameters for the effect of minimum wages on hourly wages and employment, it appears unlikely that raising the minimum wage will significantly lower family income inequality.     

Tenure, business cycle and the wage-setting process

We analyze the interaction between job tenure and external labor market conditions in wage determination. First, we introduce a model that combines job matching with business-cycle effects. As the employment relationship progresses, the worker appropriates a portion of the value of the match-specific human capital she accumulates, gradually becoming shielded from the cyclical variations in external labor market conditions: the employment relationship is progressively “internalized”. Then, we present empirical evidence supporting this prediction: the elasticity of wages to the unemployment rate decreases with tenure. This finding is robust to different specifications that allow for job heterogeneity, and it contributes to the interpretation of recent evidence of changes in the effect of the business cycle on wages.     

OCCUPATIONAL AND INDUSTRY SPECIFICITY OF HUMAN CAPITAL IN THE BRITISH LABOUR MARKET

This paper builds on the recent literature on the importance of occupational and industry experience on wages and extends Kambourov and Manovskii's (2002) study using British data. Occupational experience is estimated to make a significant contribution to wage growth, while the evidence on industry specificity is not very supportive. The second contribution of the paper is that it assesses whether there is heterogeneity in the estimated returns to work experience across one-digit industries and occupations. The findings suggest that industry and occupational experience is important for individuals in professional and managerial jobs or jobs in the banking and finance sector.     

Why do immigrant workers in Australia perform better than those in Canada? Is it the immigrants or their labour markets?

Research comparing the labour market performance of recent cohorts of immigrants to Australia and Canada points to superior employment and earnings outcomes in Australia. Examining Australian and Canadian Census data between 1986 and 2006, we find that this performance advantage is not driven by differences in broader labour market conditions affecting all new labour market entrants. Rather, the results from comparing immigrants from a common source country – either the U.K., India, or China – suggest that Australian immigrants perform better, particularly in average earnings, primarily because of a different source country distribution. Moreover, the recent tightening of Australian selection policy, most notably its use of mandatory pre‐migration English‐language testing, appears to be having an effect, primarily by further shifting the source country distribution of immigrants away from non‐English‐speaking source countries, rather than in identifying higher‐quality migrants within source countries.