Essays on Human Capital

This dissertation studies the role of human capital in urbanization and labor market in China.Chapter 1 models and quantifies the importance of within-firm skill complementarity in explaining cross-city productivity gaps in China. I argue that skill complementarity is an important driver of skill concentration which augments these productivity gaps with agglomeration economies. I develop a spatial general equilibrium model that captures an economy inhabited by heterogeneous individuals who form production teams through assortative matching and sort across cities in these teams. I structurally estimate the model using firm-level census data.Through counterfactual analysis, I find that within-firm skill complementarity accounts for 18% of cross-city productivity gaps in China. I further examine the general equilibrium effects of place-based policies: subsidizing skilled individuals to reside in second-tier cities. The simulated equilibrium shows local gains from such policies at the expense of other cities, suggesting an equity-efficiency trade-off in a spatial economy.Chapter 2 estimates the income gains from migrating for jobs after graduation using survey data on college graduates. I apply propensity score matching and compare students who have similar propensity to move. I find 12-15% gains in starting salary from this geographic mobility. The effect does not vary significantly across family background and education. Further analysis on mechanisms suggests that the migration premium is mainly attributed to local agglomeration factors at the destination.Chapter 3 turns to one type of human capital and studies the impact of retaking in English test on the labor market. I draw evidence from a national English test and exploit a manipulated regression discontinuity at the passing cutoff for certificates. While there is a positive relationship between scores and wages, I find a 10% jump in starting salary after graduation for those who barely pass the test and bunching just above the score threshold. Among students at risk of failing, retakers are positively selected in terms of abilities unrelated to English skills. Analysis from other job outcomes suggests that the wage gap at cutoff is associated with access to larger firms and state-owned firms