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Title: Recent Flattening College Wage Premium: Demand Reversal, Polarization or Supply Change?

Citation Type: Working Paper

Publication Year: 2018

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ISSN: 1556-5068

DOI: 10.2139/ssrn.3157792

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Abstract: Unlike the 1980s, the rapid rise in college wage premium decelerated since 1990s and became much slower after 2000. There are some different explanations for the flattening college wage premium. In this paper, I use a decomposition and counterfactual simulation approach to evaluate three explanations of flattening college wage premium during 2000-2010 and 2000-2015, i.e., demand reversal, polarization and supply change. The simulation results suggest: i. supply change is the most powerful explanation; ii. polarization has explanatory power but not robust; and iii. demand reversal has little efficacy in explaining the fact. By a close look of three explanations, I argue that the "failure" of demand reversal story and the "unstable" impact of polarization story indeed suggest some kinds of weakness of the analytical framework. And there are still some unexplained facts related to the supply change story. A better framework should depend on the endogenous supply of high-skilled workers and heterogenous quality of high-skilled workers.

Url: https://www.ssrn.com/abstract=3157792

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Authors: Huang, Yiheng

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Data Collections: IPUMS CPS

Topics: Education

Countries: United States