Higher-Education Policies and the College Wage Premium: Cross-State Evidence from the 1990s

Abstract

Exploiting differences across U.S. states, this paper demonstrates that there is a tight link between higher education policies, past enrollment rates, and recent changes in the college wage premium among labor market entrants. The analysis reveals, however, that this relationship is much weaker in states with high private enrollment rates, high levels of interstate mobility, or interstate trade. The within-state estimates of the own-cohort relative supply effect shed some light on the extent to which the U.S. labor market can be characterized as a single national market or a collection of state-specific labor markets.