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

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Author Info
Antonio Ciccone ()
Giovanni Peri

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Abstract

The identification of aggregate human capital externalities is still not fully understood. The existing (Mincerian) approach confounds positive externalities with wage changes due to a downward sloping demand curve for human capital. As a result, it yields positive externalities even when wages equal marginal social products. We propose an approach that identifies human capital externalities whether or not aggregate demand for human capital slopes downward. Another advantage of our approach is that it does not require estimates of the individual return to human capital. Applications to US cities and states between 1970 and 1990 yield no evidence of significant average -schooling externalities.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 611.

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Date of creation: Mar 2002
Date of revision: Jul 2005
Handle: RePEc:upf:upfgen:611

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Related research
Keywords: Human capital; Externalities; wages; downward sloping labor; demand; imperfect substitutability;

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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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