Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 16/2018: The Supply of Skill and Endogenous Technical Change: Evidence From a College Expansion Reform

Pedro Carneiro (), Kai Liu () and Kjell G. Salvanes ()
Additional contact information
Pedro Carneiro: University College London, Postal: University College London, Institute for Fiscal Studies, and Centre for Microdata Methods and Practice, London, UK
Kai Liu: University of Cambridge, Postal: Faculty of Economics, University of Cambridge, Sidgwick Avenue, Cambridge, CB3 9DD, UK
Kjell G. Salvanes: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

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: Skilled labor; skilled wages; college expansion reform

JEL-codes: J23; J24

68 pages, July 17, 2018

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