The Supply of Skill and Endogenous Technical Change: Evidence from a College Expansion Reform

73 Pages Posted: 6 Sep 2018

See all articles by Pedro Manuel Carneiro

Pedro Manuel Carneiro

University College London - Department of Economics; IZA Institute of Labor Economics

Kai Liu

Norwegian School of Economics (NHH)

Kjell G. Salvanes

Norwegian School of Economics (NHH) - Department of Economics; IZA Institute of Labor Economics

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Date Written: July 17, 2018

Abstract

We examine the labor market consequences of an exogenous increase in the supply of skilled labor in several cities in Norway, resulting from the construction of new colleges in the 1970s. We find that skilled wages increased as a response, suggesting that along with an increase in the supply there was also an increase in demand for skill. We also show that college openings led to an increase in the productivity of skilled labor and investments in R&D. Our findings are consistent with models of endogenous technical change where an abundance of skilled workers may encourage firms to adopt skill-complementary technologies, leading to an upward-sloping long-run demand for skill.

Suggested Citation

Carneiro, Pedro Manuel and Liu, Kai and Salvanes, Kjell G., The Supply of Skill and Endogenous Technical Change: Evidence from a College Expansion Reform (July 17, 2018). NHH Dept. of Economics Discussion Paper No. 16/2018. Available at SSRN: https://ssrn.com/abstract=3243325 or http://dx.doi.org/10.2139/ssrn.3243325

Pedro Manuel Carneiro

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Kai Liu

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen
Norway

Kjell G. Salvanes (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47 5 595 9315 (Phone)
+47 5 595 9543 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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