Skill Complementarities and Returns to Higher Education: Evidence from the College Enrollment Expansion in China


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.

China Economic Review, Volume 46, December 2017
Yueyuan Ma
Yueyuan Ma
Assistant Professor of Economics