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Identifying Human Capital Externalities: Theory with an Application to US Cities

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Author Info
Ciccone, Antonio () (Universitat Pompeu Fabra, CEPR and IZA, Bonn)
Peri, Giovanni (University of California, Davis)

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Abstract

Identification of the strength of human capital externalities at the aggregate level is still not fully understood. The existing method may yield positive or negative externalities even if wages reflect marginal social products. We propose an approach that yields positive average human capital externalities if and only if the marginal social product of workers with aboveaverage human capital exceeds their wage. As an application, we estimate the strength of average-schooling externalities in US cities between 1970 and 1990.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 488.

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Length: 52 pages
Date of creation: Apr 2002
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Handle: RePEc:iza:izadps:dp488

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Related research
Keywords: marginal social product of human capital; wages; human capital externalities; imperfect substitution; perfect substitution; cities;

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Find related papers by JEL classification:
O0 - Economic Development, Technological Change, and Growth - - General
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
R0 - Urban, Rural, and Regional Economics - - General
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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References listed on IDEAS
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.:
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    Other versions:
  3. Jeremy Rudd, 2000. "Empirical evidence on human capital spillovers," Finance and Economics Discussion Series 2000-46, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  12. Carneiro, Pedro & Heckman, James J., 2003. "Human Capital Policy," IZA Discussion Papers 821, Institute for the Study of Labor (IZA). [Downloadable!]
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  13. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc. [Downloadable!]
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  18. Benhabib, J. & Spiegel, M., 1992. "The Role of Human Capital in economic Development: Evidence form Aggregate Cross-Country Regional U.S. Data," Working Papers 92-46, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  23. Johnson, George E, 1997. "Changes in Earnings Inequality: The Role of Demand Shifts," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 41-54, Spring. [Downloadable!] (restricted)
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  25. Temple, Jonathan, 2001. "Growth Effects of Education and Social Capital in the OECD Countries," CEPR Discussion Papers 2875, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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