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Title: "Golden Ages": A Tale of Two Labor Markets
Citation Type: Working Paper
Publication Year: 2021
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Abstract: We document stark differences in the cross-sectional age-earnings profiles between the U.S. and China, the two largest economies in the world, during the past thirty years. We find that, first, the peak age in cross-sectional age-earnings profiles, which we refer to as the "golden age," stays almost constant at around 45-50 years old in the U.S., but decreases sharply from 55 to around 35 years old in China; second, the age-specific earnings grow drastically in China, but stay almost stagnant in the U.S.; and third, the cross-sectional and life-cycle age-earnings profiles look remarkably similar in the U.S., but differ substantially in China. We propose and empirically implement a unified decomposition framework to infer from the repeated cross-sectional earnings data the life-cycle human capital accumulation (the experience effect), the inter-cohort productivity growth (the cohort effect), and the human capital price changes over time (the time effect), under an identifying assumption that the growth of the experience effect stops at the end of the working career. The decomposition suggests that China has experienced a much larger inter-cohort productivity growth and increase in the rental price to human capital compared to the U.S., but the return to experience is higher in the U.S. We also use the inferred components to revisit several important and classical applications in macroeconomics and labor economics, including the growth accounting and the estimation of the TFP growth, then sources of the human capital price changes, the college wage premium, and the skill-biased technological change.
Url: https://www.xinchengqiu.com/publication/golden_age/golden_age.pdf
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Authors: Fang, Hamming; Qiu, Xincheng
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Institution: University of Pennsylvania
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Publisher Location: Philadelphia, Pennsylvania
Data Collections: IPUMS CPS
Topics: Labor Force and Occupational Structure
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