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Empirical Evidence on Human Capital Externalities

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Jim Davies

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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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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Konstantinos Angelopoulos & Jim Malley & Apostolis Philippopoulos, 2007. "Public Education Expenditure, Growth and Welfare," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Seung Mo Choi, 2008. "How Large are Learning Externalities? Measurement by Calibration," Working Papers 2008-26, School of Economic Sciences, Washington State University. [Downloadable!]
  3. Kirk A. Collins & James B. Davies, 2002. "Measuring Effective Tax Rates on Human Capital: The Canadian Case," University of Western Ontario, RBC Financial Group Economic Policy Research Institute Working Papers 20025, University of Western Ontario, RBC Financial Group Economic Policy Research Institute. [Downloadable!]
  4. 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. [Downloadable!]
  5. Antonio Estache & Jean-François Perrault & Luc Savard, 2007. "Impact of Infrastructure Spending in Mali: A CGE modeling approach," Cahiers de recherche 07-24, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke. [Downloadable!]
    Other versions:
  6. Growiec, Jakub, 2007. "Human Capital, Aggregation, and Growth," MPRA Paper 7070, University Library of Munich, Germany. [Downloadable!]
    Other versions:
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