We study the labor markets in China and the United States, the two largest economies in the world, by examining the evolution of their cross-sectional age-earnings profiles during the past thirty years. We find that, first, the peak age in the cross-sectional age earnings profiles, which we refer to as the “golden age,” stayed almost constant at around 45-50 in the U.S., but decreased sharply from 55 to around 35 in China; second, the age-specific earnings grew drastically in China, but stayed almost stagnant in the U.S.; third, the cross-sectional and life-cycle age-earnings profiles were remarkably similar in the U.S., but differed substantially in China. We propose and empirically implement a decomposition framework to infer from the repeated cross-sectional earnings data the experience effect (i.e., human capital accumulation over the life cycle), the cohort effect (i.e., inter-cohort human capital growth), and the time effect (i.e., changes in the human capital rental prices over time), under an identifying assumption that the growth of the experience effect stops at the end of one’s working career. The decomposition suggests that China has experienced a much larger inter-cohort productivity growth and higher increase in the rental price to human capital, but lower returns to experience, compared to the U.S. We also use the inferred components to revisit several important and classical applications in macroeconomics and labor economics, including growth accounting and the estimation of TFP growth, and the college wage premium and skill-biased technical change.

We build a unified framework to quantitatively examine population aging and credit market frictions in contributing to Chinese economic growth between 1977 and 2014. We find that demographic changes together with endogenous human capital accumulation account for a large part of the rise in per capita output growth, especially after 2007, as well as some of the rise in savings. Credit policy changes initially alleviate the capital misallocation between private and public firms and lead to significant increases in both savings and output growth. Later, they distort capital allocation. While contributing to further increase in savings, the distortion slows down economic growth. Among factors that we consider, increased life expectancy and financial development in the form of reduced intermediation cost are the most important in driving the dynamics of savings and growth.

This paper studies how a potential policy change that raises women’s social security eligibility age from 50 to 60 would affect women’s employment, human capital, and earnings in China. I develop a dynamic model of female labor supply, featuring voluntary retirement; occupational choice; human capital accumulation contingent on occupation, age, and employment status; and child care using time inputs from parents, grandparents, and formal child care from the market. I estimate the model parameters by matching moments on employment, wages, and the time allocation of child care from micro data in China. The policy counterfactual raising women’s social security eligibility age yields two main findings. First, the policy change leads to only a moderate increase in aggregate labor supply because it affects the employment of old and young women in opposite directions. The reduction in social security insurance encourages women above the age of 50 to supply more labor. Yet low-skilled young women with children reduce their labor supply in response to the children’s grandmothers working more and providing less child care. Second, since human capital accumulation is faster on the earlier career path rather than later, the reduction in early career employment leads to persistent losses in human capital and earnings for low-skilled women.

Women work less often and earn significantly less than men in Japan. We use panel data to investigate employment and earnings dynamics of single and married women over the life-cycle and build a structural model to study roles of fiscal policies in accounting for their behavior. We show that eliminating spousal deductions, social insurance tax exemptions and survivors’ pension benefits for low-income spouses would significantly raise labor supply of women and their earnings. More women would choose regular jobs rather than contingent jobs, accumulate more human capital and enjoy higher income growth. The government would earn higher net revenues and there is a welfare gain when additional taxes are transferred back.