The UK Education Expansion and Technological Change

The proportion of UK people with university degrees by age 30 more than doubled between those born in 1965-69 and those born ten years later. However, the age profile of the graduate wage premium remained largely unchanged across cohorts. We show that these patterns cannot be explained by composition changes. Instead, we present a model in which firms choose between centralized and decentralized organizational forms and demonstrate that it can explain the main patterns. We also show the model has implications that differentiate it from standard exogenous technological change models and that UK data fit with those implications. We argue that our model of endogenous technological choice is plausible for the UK because of its status as a technological follower where workplaces only adopt frontier IT related technologies when educational levels in the labour force are high