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The spatial decay of human capital externalities - A functional regression approach with precise geo-referenced data

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  • Eppelsheimer, Johann
  • Jahn, Elke J.
  • Rust, Christoph

Abstract

This paper analyzes human capital externalities from high-skilled workers by applying functional regression to precise geocoded register data. Functional regression enables us to describe the concentration of high-skilled workers around workplaces as continuous curves and to efficiently estimate a spillover function determined by distance. Furthermore, our rich panel data allow us to address the sorting of workers and disentangle human capital externalities from supply effects by using an extensive set of time-varying fixed effects. Our estimates reveal that human capital externalities attenuate with increasing distance and disappear after 25 km. Externalities from the immediate neighborhood of an establishment are twice as large as externalities from surroundings 10 km away.

Suggested Citation

  • Eppelsheimer, Johann & Jahn, Elke J. & Rust, Christoph, 2022. "The spatial decay of human capital externalities - A functional regression approach with precise geo-referenced data," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:regeco:v:95:y:2022:i:c:s0166046222000163
    DOI: 10.1016/j.regsciurbeco.2022.103785
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    More about this item

    Keywords

    Human capital externalities; Functional regression; Geodata; Wages;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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