Does Experience Still Pay? Evidence from Competitive and Institutional Labor Markets

Shikai Li and Jie Chen

No 1759, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: Standard human capital theory predicts a positive, concave experience-wage relationship. Using repeated cross-sectional data from China (2010-2023), we document a structural breakdown of this canonical Mincer profile by 2023, as aggregate returns to experience become statistically insignificant. This aggregate collapse conceals a sharp institutional divergence. In competitive markets, late-career experience returns turn negative. Conversely, institutional sectors-specifically state-owned enterprises and politically connected employment-maintain stable positive returns. These findings suggest that during rapid technological change, experience premiums are increasingly governed by institutional wage-setting mechanisms rather than uniform market productivity.

Keywords: Returns to experience; Human capital depreciation; Labor market segmentation; Wage inequality; Mincer equation; Technological change (search for similar items in EconPapers)
JEL-codes: I25 I26 J24 J31 (search for similar items in EconPapers)
Date: 2026
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