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Schooling Externalities, Technology and Productivity:Theory and Evidence from U.S. States

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  • Giovanni Peri
  • Susana Iranzo

    (Department of Economics, University of California Davis)

Abstract

The recent literature on externalities of schooling in the U.S. is rather mixed: positive external effects of average education are hardly found at all, while often positive externalities from the share of college graduates are identified. This paper proposes a simple model to explain this fact and tests it using U.S. states data. The key idea is that advanced technologies, associated with high total factor productivity and high returns to skills, are complementary to highly educated workers, as opposed to traditional technologies, complementary to less educated. Our calibrated model predicts that workers with twelve years of schooling (high school graduates) are indifferent between traditional and advanced technologies, while more educated workers adopt the advanced technologies and benefit from the larger private and social returns associated to them. Only shifts in education above high school graduation are therefore associated with positive social returns stemming from more efficient technologies. The empirical analysis, using compulsory attendance laws, immigration of highly educated workers and the location of land-grant colleges as instruments confirm that an increase in the share of college graduates, but not an increase in the share of high school graduates, had large positive production externalities in U.S. States.

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Bibliographic Info

Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 635.

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Length: 45
Date of creation: 20 Jul 2006
Date of revision:
Handle: RePEc:cda:wpaper:06-35

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Web page: http://www.econ.ucdavis.edu
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  1. Angel de la Fuente & Rafael Doménech, 2006. "Human Capital in Growth Regressions: How Much Difference Does Data Quality Make?," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 1-36, 03.
  2. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
  3. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
  4. Joshua D. Angrist, 1995. "The Economic Returns to Schooling in the West Bank and Gaza Strip," Working papers 95-5, Massachusetts Institute of Technology (MIT), Department of Economics.
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  9. Acemoglu, D., 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," Working papers 97-14, Massachusetts Institute of Technology (MIT), Department of Economics.
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  13. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August.
  14. Ethan Lewis, 2003. "Local, open economies within the U.S.: how do industries respond to immigration?," Working Papers 04-1, Federal Reserve Bank of Philadelphia.
  15. Card, David, 2001. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 22-64, January.
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  17. Kevin Milligan & Enrico Moretti & Philip Oreopoulos, 2003. "Does Education Improve Citizenship? Evidence from the U.S. and the U.K," NBER Working Papers 9584, National Bureau of Economic Research, Inc.
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  19. Antonio Ciccone & Giovanni Peri, 2004. "Long-run substitutability between more and less educated workers: Evidence from U.S. States 1950-1990," Economics Working Papers 764, Department of Economics and Business, Universitat Pompeu Fabra.
  20. repec:fth:prinin:317 is not listed on IDEAS
  21. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
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