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Are there human capital externalities in U.S. states? Evidence from the Current Population Survey

Author

Listed:
  • Kristen Monaco

    (US Bureau of Labor Statistics)

  • Steven Yamarik

    (California State University Long Beach)

Abstract

This paper estimates human capital externalities across U.S. states, using the Current Population Survey (CPS) and state-level data. By directly controlling for individual job characteristics and state labor market conditions, we can identify the human capital externality in an augmented Mincerian model. We find that an extra year of state-level average schooling increases individual wages by five percent above and beyond the private return to education. Subsequent analysis finds that the estimated externality is larger in highly-educated, highly-innovative states. These results imply that the positive coefficient for state-level schooling is in fact an externality and that differences in human capital externalities can help explain “The Great Divergence†in wages between geographic areas with highly-skilled workers versus those with low-skilled workers.

Suggested Citation

  • Kristen Monaco & Steven Yamarik, 2015. "Are there human capital externalities in U.S. states? Evidence from the Current Population Survey," Economics Bulletin, AccessEcon, vol. 35(4), pages 2345-2362.
    • Handle: RePEc:ebl:ecbull:eb-15-00208
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    More about this item

    Keywords

    human capital externalities; returns to college; education spillovers;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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