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The Effects of Expanding Higher Education on Wages and Establishments' Labor Demand

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  • Eric Schuss

Abstract

This study examines the impact of increased access to higher education on labor demand, wages, and labor market structure. I focus on the quasi-experimental increase in the number of universities and universities of applied sciences in Bavaria since the 1970s and establishment of such higher education institutes under the "Future of Bavaria Offensive" program in the 1990s. I use administrative establishment-level data and find a positive but statistically insignificant effect on median wages resulting from expansion of higher education. While there is a negative but insignificant impact on wages of highly skilled workers, those without academic or vocational degree experience an increase in wages. I also find that training activities decline immediately after establishment of a new higher education institution. Further empirical analyses indicate that this decline is driven by changes in educational choices of school graduates rather than by labor demand of establishments.

Suggested Citation

  • Eric Schuss, 2025. "The Effects of Expanding Higher Education on Wages and Establishments' Labor Demand," Economics of Education Working Paper Series 0239, University of Zurich, Department of Business Administration (IBW).
    • Handle: RePEc:iso:educat:0239
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    More about this item

    Keywords

    Expansion of higher education; Labor demand; Wages; Event-study design;
    All these keywords.

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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