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Local Human Capital Externalities: An Overlapping Generation Model and Some Evidence on Experience Premia

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  • Giovanni Peri

Abstract

In an interesting and influential paper Robert Lucas (1993) considering the experience of East Asian small economies, suggests that 'on the job' learning could be the principal engine of their miraculous growth in the last 20 years. In this paper I develop an overlapping generation model where on the job learning, via local spillovers and local interactions, is the main channel of human capital accumulation in small open economies (as cities). The model predicts that skills' accumulation, due to experience in the local environment, has an effect on the experience premia of the workers and on the dispersion of their wages. I find the balanced growth path of the model and I simulate the adj ustment path after a technological shock. The second part of the paper conveys some suggestive evidence on what local characteristics affect the accumulation of skills, using data from 236 U.S. cities. Local characteristics which seem to have a strong imp act on the accumulation of skills are the \rdblquote technological intensity\rdblquote of the local manufacturing sector, the average level of education and the density of teachers in the city. This seems to confirm that the 'quality' of local environments is very important for skills' accumulation.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 219.

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Date of creation: 1999
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Handle: RePEc:ces:ceswps:_219

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
  3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  4. Jess Gaspar & Edward Glaeser, 1996. "Information Technology and the Future of Cities," NBER Working Papers 5562, National Bureau of Economic Research, Inc.
  5. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  6. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February.
  7. Glaeser, E.L. & Mare, D.C., 1994. "Cities and Skills," Working Papers e-94-11, Hoover Institution, Stanford University.
  8. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June.
  9. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
  10. Glaeser, E.L. & Mare, D.C., 1994. "Cities and Skills," Working Papers e-94-11, Hoover Institution, Stanford University.
  11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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Cited by:
  1. BERTINELLI, Luisito, 2003. "Does urbanization always foster human capital accumulation ?," CORE Discussion Papers 2003040, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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