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Empirical Evidence on Human Capital Externalities

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  • Jim Davies

Abstract

The focus of the paper is on the extent to which human capital formation (specifically, post-secondary education and training) benefits society in general, and productivity growth in particular, over and above its benefit to the individual. The paper provides a comprehensive review of the economic literature in this area and concludes that a very rough estimate of the benefit to society of investment in post-secondary education and training is in the range of 6 to 8 percent. This is in addition to the private rate of return of about 8 percent. The existence of this societal benefit (externality) justifies government assistance to post-secondary education and training. A possible extension of this work would be to attempt to determine if current assistance levels are consistent with the estimated level of the externality. Ce document porte principalement sur le degré auquel la formation du capital humain (plus particulièrement l’enseignement post-secondaire et la formation) bénéficie à la société en général et accroît la productivité, en plus du simple avantage qu’en tire l’individu. Le document offre un examen exhaustif de la littérature économique publiée à ce propos et conclut que la société bénéficie des investissements dans l’enseignement post-secondaire et la formation dans une proportion approximative de 6 à 8 p. 100. Et ce, en plus du taux de rendement individuel d’environ 8 p. 100. L’existence de bénéfices sociétaux (externalité) justifie l’aide du gouvernement à l’enseignement post-secondaire et à la formation. Une suite possible à ces travaux serait d’essayer de déterminer si les niveaux d’aide actuels sont conformes au niveau estimé d’externalité.

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Paper provided by Department of Finance Canada in its series Working Papers-Department of Finance Canada with number 2003-11.

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Handle: RePEc:fca:wpfnca:2003-11

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Citations

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Cited by:
  1. Gibson, John & McKenzie, David, 2010. "The Economic Consequences of "Brain Drain" of the Best and Brightest: Microeconomic Evidence from Five Countries," IZA Discussion Papers 5124, Institute for the Study of Labor (IZA).
  2. Konstantinos Angelopoulos & Jim Malley & Apostolis Philippopoulos, 2007. "Public Education Expenditure, Growth and Welfare," CESifo Working Paper Series 2037, CESifo Group Munich.
  3. Daniel F. Heuermann, 2009. "Career Networks and Job Matching - Evidence on the Microeconomic Foundations of Human Capital Externalities," IAAEG Discussion Papers until 2011 200901, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  4. Seung Mo Choi, 2008. "How Large are Learning Externalities? Measurement by Calibration," Working Papers 2008-26, School of Economic Sciences, Washington State University.
  5. Kirk A. Collins & James B. Davies, 2002. "Measuring Effective Tax Rates on Human Capital: The Canadian Case," University of Western Ontario, Economic Policy Research Institute Working Papers 20025, University of Western Ontario, Economic Policy Research Institute.
  6. Growiec, Jakub, 2010. "Human Capital, Aggregation, And Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 14(02), pages 189-211, April.
  7. Antonio Estache & Jean-François Perrault & Luc Savard, 2009. "Impact of Infrastructure Spending in Mali: A CGE Modeling Approach," Working Papers ECARES 2009_009, ULB -- Universite Libre de Bruxelles.
  8. Growiec, Katarzyna & Growiec, Jakub, 2009. "Social Capital, Trust, and Multiple Equilibria in Economic Performance," MPRA Paper 19518, University Library of Munich, Germany.
  9. Antonio Estache & Jean-François Perrault & Luc Savard, 2008. "Impact Of Infrastructure Spending In Sub-Saharan Africa: A Cge Modeling Approach," Cahiers de recherche 08-03, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  10. Michael Landesmann & Sebastian Leitner & Robert Stehrer & Terry Ward, 2009. "Skills and Industrial Competitiveness," wiiw Research Reports 356, The Vienna Institute for International Economic Studies, wiiw.
  11. Giuseppe C.Ruggeri, 2009. "Regional Fiscal Flows: Measurement Tools," Working Papers 2009/4, Institut d'Economia de Barcelona (IEB).
  12. Teguh Yudo Wicaksono & Deni Friawan, 2008. "Recent Developments of Higher Education in Indonesia : Issues and Challenges," EABER Working Papers 21949, East Asian Bureau of Economic Research.
  13. Hunt, Gary L. & Mueller, Richard E., 2010. "Returns to Skill, Tax Policy, and North American Migration by Skill Level: Canada and the United States 1995 - 2001," CLSSRN working papers clsrn_admin-2010-11, Vancouver School of Economics, revised 26 Mar 2010.

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