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Human Capital Externalities in Western Germany

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  • Daniel F. Heuermann

    ()
    (Institute for Labour Law and Industrial Relations in the EC, University of Trier)

Abstract

The paper sheds light on the impact of spatial agglomeration of human capital on individual wages in Western Germany. Using panel data it shows that regional wage differentials are to a large extent attributable to localized human capital externalities arising from the regional share of highly qualified workers. Employing the regional number of public schools and of students as instrumental variables the paper shows that human capital externalities are underestimated in ordinary panel regressions for wages of highly qualified and non-highly qualified workers alike due to supply shifts of highly qualified workers. An analysis by sector reveals that human capital externalities are more pronounced in manufacturing than in the service sector. We find indication that highly qualified workers benefit from intra-industry knowledge spillovers, while non-highly qualified workers profit from pecuniary externalities between industries. Our findings are stable among a variety of indicators of regional human capital and robust to the inclusion of other sources of increasing returns, as well as wage curve, price level, and amenity effects.

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File Function: Revised version, 2009
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Bibliographic Info

Paper provided by Institute of Labour Law and Industrial Relations in the European Union (IAAEU) in its series IAAEG Discussion Papers until 2011 with number 200903.

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Length: 34 pages
Date of creation: Apr 2009
Date of revision:
Publication status: Published in Spatial Economic Analysis, Taylor and Francis Journals, vol. 6(2), pages 139-165
Handle: RePEc:iaa:wpaper:200903

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Keywords: Human Capital Externalities; Agglomeration; Urban Wage Premium;

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Cited by:
  1. Rasmus Thönnessen & Erich Gundlach, 2013. "The size of human capital externalities: cross-country evidence," Public Choice, Springer, Springer, vol. 157(3), pages 671-689, December.
  2. Filiztekin, Alpay, 2011. "Social returns to education in a developing country," MPRA Paper 35124, University Library of Munich, Germany.
  3. Florian Immanuel Schumacher & Joilson Dias, 2011. "The Human Capital Function: Sectoralexternalities," Anais do XXXVIII Encontro Nacional de Economia [Proceedings of the 38th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of 215, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  4. B. Fingleton & P. Cheshire & H. Garretsen & D. Igliori & J. Le Gallo & P. McCann & J. McCombie & V. Monastiriotis & B. Moore & M. Roberts, 2011. "We Move into Distinguished Company," Spatial Economic Analysis, Taylor & Francis Journals, Taylor & Francis Journals, vol. 6(2), pages 133-138.

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