Working Paper: CEPR ID: DP13045
Authors: Pedro Carneiro; Kai Liu; Kjell G. Salvanes
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.
Keywords: endogenous technical change; college reform; supply of skills
JEL Codes: J23; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increase in relative supply of skilled workers (J24) | Increase in demand for skilled labor (J24) |
| Increase in availability of skilled labor (J24) | Adoption of skill-augmenting technologies by firms (O33) |
| Type of college (STEM vs non-STEM) (I23) | Degree of impact on labor market dynamics (F66) |
| Abundance of skilled workers (J69) | Upward-sloping long-run demand for skill (J24) |
| College openings (I23) | Relative supply of skilled workers (J24) |
| College openings (I23) | Relative wages of skilled workers (J31) |
| College openings (I23) | Increase in productivity of skilled labor (J24) |
| College openings (I23) | Investments in R&D by firms (O32) |
| College openings (I23) | Upward shift in demand for skilled labor (J24) |