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Spillovers from Local Market Human Capital and the Spatial Distribution of Productivity in Malaysia


  • Conley Timothy G.

    () (University of Chicago, GSB)

  • Flyer Fredrick

    () (Lexecon, Inc.)

  • Tsiang Grace R

    () (University of Chicago)


This paper examines whether spillovers from local market human capital are important in explaining the distribution of productivity across Malaysia. We develop an empirical method for describing local human capital distributions based on the idea that spillovers are limited in scope by costs of interaction or economic distance between agents. We use estimates of the economic distance between agents to construct measures of local market human capital based on schooling rates of the population within a given radius. These measures are then used in estimating equations obtained from a simple local public goods model. Our regressions are estimated using spatial GMM, allowing for general spatial correlation across observations as a function of economic distance. We find positive wage and rent differentials associated with local human capital, evidence consistent with productive human capital spillovers. Our results for rent differentials obtain with two distinct human capital measures; however, those for wage differentials depend on the human capital measure used.

Suggested Citation

  • Conley Timothy G. & Flyer Fredrick & Tsiang Grace R, 2003. "Spillovers from Local Market Human Capital and the Spatial Distribution of Productivity in Malaysia," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-47, December.
  • Handle: RePEc:bpj:bejeap:v:advances.3:y:2003:i:1:n:5

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    References listed on IDEAS

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    Cited by:

    1. Carlino, Gerald & Kerr, William R., 2015. "Agglomeration and Innovation," Handbook of Regional and Urban Economics, Elsevier.
    2. Conley, Timothy G. & Molinari, Francesca, 2007. "Spatial correlation robust inference with errors in location or distance," Journal of Econometrics, Elsevier, vol. 140(1), pages 76-96, September.
    3. repec:bof:bofrdp:urn:nbn:fi:bof-201512111472 is not listed on IDEAS
    4. Gilles Duranton, 2007. "From cities to productivity and growth in developing countries," Working Papers tecipa-306, University of Toronto, Department of Economics.
    5. Ottaviano, Gianmarco I.P. & Pinelli, Dino, 2006. "Market potential and productivity: Evidence from Finnish regions," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 636-657, September.
    6. VĂ©ronique Gille, 2012. "Education spillovers: empirical evidence in rural India," Indian Growth and Development Review, Emerald Group Publishing, vol. 5(1), pages 4-24, April.
    7. Isacsson, Gunnar, 2005. "External effects of education on earnings: Swedish evidence using matched employee-establishment data," Working Paper Series 2005:10, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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