Scientific personnel reallocation and firm innovation: Evidence from China's college expansion

摘要

Given that the supply of scientific personnel is inelastic, the expansion of public research may negatively influence private research by driving up the wage of scientific personnel and re-allocating them away from private sectors. China's massive college expansion since 1999 and labor market segmentation provide us with a unique opportunity to investigate such a re-allocation effect on firm innovation. Consistent with the reallocation hypothesis, we find that China's college expansion negatively influenced firm innovation as well as regional innovation in the short run. Moreover, we provide direct evidence on scientific personnel reallocation by finding that when college expansion was more intensive, highly educated laborers were less likely to choose an industrial job, and those working in industries enjoyed a higher wage rate when holding a professional (research related) job.