Golden Ages: A Tale of Two Labor Markets

We document stark differences in the labor market outcomes between the U.S. and China, the largest two economies in the world, during the past 30 years. (1) The peak age in cross-sectional age-earnings profiles stays constant at around 45- 50 years old in the U.S. but decreases sharply from 55 to 35 years old in China. (2) Age-specific earnings grow drastically in China but almost stagnate in the U.S. (3) The cross-sectional and life-cycle age-earnings profiles look remarkably similar in the U.S. but differ substantially in China. To address these facts, we provide a unified decomposition framework to infer life-cycle human capital accumulation, inter-cohort productivity growth, and human capital price changes over time, from repeated cross-sectional earnings data. We apply the framework to revisit several important and classical applications in macroeconomics and labor economics.