Why Graduates Can’t Find Jobs in a Soaring Economy: Rent-Seeking Migration of College-Educated Young Workers in China

This paper studies the impact of regional inequality on the spatial distribution of college-educated young workers in China. Since the labor market is spatially segmented, secure jobs in large cities come with economic rents in terms of better compensations and access to high-quality local public services. The marketized reform of the socialist college placement system in 1997 has paved the way for educated young workers to seek these economic rents through migration. Based upon evidence from China 2000 census and 2005 placement information of a college, We argue that competitive rent-seeking incentives not only lead to talent relocation to China’s rich coastal cities, but also contribute to high graduate unemployment rate and heavy investment in post-graduate education. ∗Tao Li is assistant professor at School of Economics, Shanghai University of Finance and Economics, Shanghai, China ([email protected]). I want to thank Yao Yang, Zhu Tao, and seminar participants in Fudan and Zhejiang University for comments.