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Employer Learning and the Dynamics of Returns to Universities: Evidence from Chinese Elite Education during University Expansion

Sylvie Démurger, Eric A. Hanushek, Lei Zhang
Published Date: 
June 2019
NBER Working Paper No. 25955
National Bureau of Economic Research

This paper estimates the return to an elite university education over a college graduate’s career using the CHIP 2013 data. We find a substantial premium for graduating from an elite Chinese university at job entry, but it declines quickly with labor market experience. This pattern is entirely driven by the young cohorts who enter college after the higher education expansion that started in 1999. This pattern is more pronounced in coastal provinces and in economically more developed regions, where individual skills are highly rewarded in the labor market. The initial elite premium and its subsequent decline is found just for males; individual skills are much more consistently rewarded for females than males. The results are consistent with employer learning, where employers pay workers based on more easily observable group characteristics at job entry but rely less on these over time when more accurate information about individual productivity becomes available.