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Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities

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  • Rauch James E.

Abstract

Based on recent theoretical developments I argue that the average level of human capital is a local public good. Cities with higher average levels of human capital should therefore have higher wages and higher land rents. After conditioning on the characteristics of individual workers and dwellings, this prediction is supported by data for Standard Metropolitan Statistical Areas (SMSAs) in the United States, where the SMSA average levels of formal education and work experience are used as proxies for the average level of human capital. I evaluate the alternative explanations of omitted SMSA variables and self-selection. I conclude by computing an estimate of the effect of an additional year of average education on total factor productivity.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 34 (1993)
Issue (Month): 3 (November)
Pages: 380-400

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Handle: RePEc:eee:juecon:v:34:y:1993:i:3:p:380-400

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Web page: http://www.elsevier.com/locate/inca/622905

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  1. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
  2. Patricia E. Beeson & Randall W. Eberts, 1987. "Identifying productivity and amenity effects in interurban wage differentials," Working Paper 8707, Federal Reserve Bank of Cleveland.
  3. George J. Borjas & Stephen G. Bronars & Stephen J. Trejo, 1992. "Self-Selection and Internal Migration in the United States," NBER Working Papers 4002, National Bureau of Economic Research, Inc.
  4. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  5. Rauch, James E, 1991. "Comparative Advantage, Geographic Advantage and the Volume of Trade," Economic Journal, Royal Economic Society, vol. 101(408), pages 1230-44, September.
  6. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  7. Schultz, T. Paul, 1988. "Education investments and returns," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 13, pages 543-630 Elsevier.
  8. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  9. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  10. Balassa, Bela, 1979. "The Changing Pattern of Comparative Advantage in Manufactured Goods," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 259-66, May.
  11. Richard B. Peiser & Lawrence B. Smith, 1985. "Homeownership Returns, Tenure Choice and Inflation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(4), pages 343-360.
  12. Jovanovic, Boyan & Rob, Rafael, 1989. "The Growth and Diffusion of Knowledge," Review of Economic Studies, Wiley Blackwell, vol. 56(4), pages 569-82, October.
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