Winning the Race against Technology

Author Name KAWAGUCHI Daiji (Faculty Fellow, RIETI) / MORI Yuko (Japan Society for the Promotion of Science (JSPS))
Creation Date/NO. April 2014 14-E-017
Research Project Reform of Labor Market Institutions
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This study examines the importance of the supply factor as a determinant of the college wage premium by comparing the trends of the college wage premium between Japan and the United States. The wage differential between college and high school graduates decreased from 0.35 log point to 0.34 log point in Japan between 1986 and 2008, while during the same period, it increased from 0.43 to 0.65 in the United States. This paper demonstrates that the more rapid increase in the number of college graduates in Japan explains about one-third of these contrasting trends. A simulation indicates that if the supply in the United States had followed that in Japan, the return to college would have increased by 0.15 point instead of the actual 0.23 point. The difference in post-war fertility trends largely explains the difference in the supply increase of college graduates between the two countries.

Published: Daiji Kawaguchi and Yuko Mori, 2016. "Why has wage inequality evolved so differently between Japan and the US? The role of the supply of college-educated workers," Economics of Education Review, Vol. 52, pp. 29-50