The Impact of Higher Education Expansion on the Educational Wage Premium in Taiwan: 1985 to 2015

Abstract

This research investigates the impact of higher education expansion on the educational wage premium from a long-term perspective in Taiwan. By using 1985 to 2015 Manpower Utilization Survey (MUS) data with the difference-in-difference-in-differences model (DDD), this study analyzes the change of the wage premium of university educated versus lower-than-university educated counterparts across the expansion of higher education since 1995. The number of universities in Taiwan tripled between 1995 and 2005, from 50 to more than 150, with upgrading of about 100 technology colleges and vocational schools additionally. Dramatic expansion of universities as well as the number of university graduates will shrink the university wage premium for the young generation who entered into the labor market after year 2000, but the older generation will be less affected. The empirical results show that the wages premium of university graduates of the younger generation is 12% to 21% lower than their older generation counterparts due to the higher-education expansion.