Human capital externalities
The paper tests for the existence of human capital externalities using a micro-level approach: the Mincerian wage regression augmented with the average level of education in cities. To solve identification problems arising from the endogeneity of average education, the study exploits a natural experiment provided by the process of economic transition: average education at the end of communism can be seen as exogenous in respect of wages prevailing after the start of transition. Our empirical results based on the RLMS data show that a 1 percentage point increase in the share of city residents with a university degree results in an increase of wages of city residents by about 1 percent. Copyright (c) 2008 The Author. Journal compilation (c) 2008 The European Bank for Reconstruction and Development.
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Volume (Year): 16 (2008)
Issue (Month): 3 (07)
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