Title: Human Capital and Directed Technology Change: Evidence from China's College Expansion

Speaker: Xiaoyu Xia, Chinese University of Hong Kong

Time: March 10th, 2017 13:30–15:00 

Venue: Conference Room 106B, Zhonghui Building (College of Economics, JNU)

About the speaker:

Xiaoyu Xia is an Assistant Professor at the Decision Science and Managerial Economics Department in the Business School of Chinese University of Hong Kong. Before joining the CUHK, she received PhD in Economics from the University of California, Berkeley. Her research interests cover labor economics and applied econometrics. Her current projects focus on the education, marriage and working decision of young workers.

Abstract:

A prominent change in the wage structure observed in many countries is the increasing college wage premium. The increasing college premium often parallels with the rise of relative supply of college workers. The consensus in the literature is that recent technical change favors highly educated workers, thus the shift of relative demand for college educated workers drives the supply and the wage premium of college workers. However, another explanation for this parallel trend is that technological innovations respond to the change in the composition of labor force. To investigate the linkage between human capital investment and skill-biased technology changes, this paper adopts the theoretic framework of Acemouglu (1998) to explore whether a policy aimed at substantially increasing rates of post-secondary education can direct technology adoption in an economy. Our empirical work, which exploits the exogenous variation in college expansion across cities in China since 1999, finds economically significant and robust effects of the enlarged college-educated labor force on the development of firms that are in human capital intensive sector. In particular, we find the increased college-educated workers ratio in a city stimulates the capital accumulation, R&D expenditure and machinery imports among manufacturing firms in high-skill sector but not among those in low-skill sector. These findings are consistent with the directed technical change mechanism but cannot be explained by the trend of international trade or internal migration in China.