Frischseminar: Lei Li

Abstract:
This paper proposes that imported capital goods, which embody 
skill-complementary technologies, can lead to an increase in the 
supply of skill in developing countries like China. By exploiting the 
cross-prefecture variation in imported capital goods, I show that the 
surge in imported capital goods encourages human capital accumulation 
and migration in China. To tackle causality, I instrument a 
prefecture's import growth of capital goods with that in other 
regions. There are three main findings. Firstly, the regional 
difference in imported capital goods can explain 27 percent of the 
regional difference in college share between 2000 and 2010. A 
prefecture with a $100 increase in imported capital goods per capita 
had a 1.4 percentage points increase in college share. Secondly, this 
paper quantifies the importance of the three channels, namely skill 
acquisition of local stayers, immigration of skilled workers, and 
emigration of skilled workers, through which imported capital goods 
increase college share. I find that the first channel is the most 
important. Thirdly, I trace out the responses of skill supply to the 
demand shift. I find that imported capital goods increase college wage 
premium and the effect attenuates over time with the increase in skill 
supply.