Title: Shrinking Earnings Premium for University Graduates in Hong Kong: The Effect of Quantity or Quality?
Reference Number: 1075
Publication Date: October 2003
JEL Classifcation: J31, I28, J18

Hon-Kwong Lui
Lingnan University

Wing Suen
The University of Hong Kong

In 1989, the Hong Kong government embarked on a program to increase the provision of first-year first-degree places from 7 percent to 18 percent of the 17-20 age cohort. The expansion of tertiary education represents a large and exogenous increase in supply of university graduates to the territory. This paper measures the labor market effects of the expansion program by studying the changes in earnings premium for university graduates. Two alternative hypotheses, crowding and quality effects, are identified to explain why the earnings premium shrinks. The results support the view that the declining quality of university graduates is the prime candidate for the declining earnings premium.

Published in Contemporary Economic Policy 23:2 (2005), pp. 242-254.

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Last modified: 01/24/2007