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Higher Education Expansion, Human Capital Externalities and Wages: Italian Evidence within Occupation

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  • Giulio Bosio

    ()
    (University of Milan)

  • Chiara Noè

    ()
    (University of Cergy-Pointoise)

Abstract

The Italian system of higher education has recently experienced a process of radical transformation. The so-called 3+2 university reform reflects a big increase in the supply of college graduates that has attracted the attention of policy makers and fostered the debate on the size of human capital externalities. Using the 2009 Italian Labour Force Survey and incorporating a measure of graduate density within each occupation, in this article, we explore whether the social returns to education exceeds the private return and less educated workers gain more than college educated workers from spillovers associated with higher college share in their relative occupation. The OLS results clearly indicate that increases in graduate density have positive effects on wages and that the effect is larger for less educated workers, also controlling for potential confounding factors. However, the concentration of college workers across occupations is such that we may have a potential endogeneity problem. In order to recover a causal interpretation and to isolate the effect of graduate density, we employ an IV strategy exploiting the lagged demographic and occupational structure and the variation in the introduction of 3+2 courses at regional level. Merely, IV estimates largely indicate that the size of spillovers is significantly increased with respect to standard OLS results. Indeed, we estimate that a 1% increase in the college share within occupation raises wages by 0.9-1.3% for male and female, respectively. The effect is further larger for less educated workers.

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File URL: http://www2.almalaurea.it/universita/pubblicazioni/wp/pdf/wp39.pdf
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Bibliographic Info

Paper provided by AlmaLaurea Inter-University Consortium in its series Working Papers with number 39.

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Length: 24
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:laa:wpaper:39

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  1. Philip Du Caju & Gábor Kátay & Ana Lamo & Daphne Nicolitsas & Steven Poelhekke, 2010. "Inter-industry wage differentials in EU countries : What do cross-country time-varying data add to the picture ?," Working Paper Research 189, National Bank of Belgium.
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  8. Kathryn L. Shaw, 1984. "A Formulation of the Earnings Function Using the Concept of Occupational Investment," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 319-340.
  9. Card, David, 1999. "The causal effect of education on earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 30, pages 1801-1863 Elsevier.
  10. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
  11. Lange, Fabian & Topel, Robert, 2006. "The Social Value of Education and Human Capital," Handbook of the Economics of Education, Elsevier.
  12. Barbara Gebicka, 2010. "College Degree Supply and Occupational Allocation of Graduates the Case of the Czech Republic," CERGE-EI Working Papers wp407, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  13. Jason M. Fletcher & Jody L. Sindelar, 2009. "Estimating Causal Effects of Early Occupational Choice on Later Health: Evidence Using the PSID," NBER Working Papers 15256, National Bureau of Economic Research, Inc.
  14. Iourii Manovskii & Gueorgui Kambourov, 2004. "Occupational Specificity of Human Capital," 2004 Meeting Papers 197, Society for Economic Dynamics.
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