Why rapidly expanding the number of college-trained workers may not lower income inequality: the curious case of Taiwan, 1978-2011

Abstract

<p>Since 1990, Taiwan increased the college share of its labor force from 7% to 28% by converting junior colleges to 4-year colleges. Such a rapid surge in skill supply should suppress college wages and lower income inequality. Instead, inequality rose steadily. The surge of weaker college graduates made them weak substitutes for better trained college graduates, increasing wage inequality within skill groups. The college premium would have been 15% higher had college quality remained unchanged at its 1992 level. The Taiwan case shows that increasing college access alone will not lower income inequality unless college quality is maintained.</p>