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Human Capital Externalities in Western Germany

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  • Daniel Heuermann

Abstract

Abstract Using panel data and employing instrumental variables we show that regional wage differences across German regions are partly attributable to localized human capital externalities. This finding is stable across different indicators for regional aggregate education and robust to agglomeration, wage curve, price level and amenity effects. A comparison of our results with Moretti's findings for the USA suggests that national labour market institutions influence the distribution of wage gains from aggregate regional education among workers of different educational backgrounds. An analysis by sector reveals that human capital externalities are generally more pronounced in manufacturing than in the service sector. Externalités des ressources humaines en Allemagne de l'Ouest Résumé En utilisant des données pluridimensionnelles et en faisant usage de variables instrumentales, nous sommes en mesure de démontrer que les différences salariales régionales dans les différentes régions d'Allemagne sont attribuables, en partie, à des externalités en ressources humaines localisées. Cette conclusion est stable dans les différents indices pour l’éducation globale à l’échelon régional, et solide sur le plan de l'agglomération, des courbes salariales, des niveaux de prix, et des facteurs d'agrément. Une comparaison entre nos résultats et les conclusions de Moretti, pour les États-Unis, indique que les institutions nationales du marché du travail influent sur la distribution des gains salariaux découlant de l’éducation régionale globale parmi des travailleurs provenant de différents milieux éducatifs. Une analyse par secteur révèle que les externalités de ressources humaines sont généralement plus prononcées dans le secteur industriel que dans le secteur tertiaire. Factores exógenos del capital humano en Alemania Occidental Resumen Utilizando datos de panel y empleando variables instrumentales, demostramos que las diferencias salariales interregionales alemanas pueden atribuirse en parte a factores exógenos de capital humano confinados. Esta conclusión es estable entre los diferentes indicadores del acumulado regional de educación y consistente ante los efectos de la aglomeración, curva salarial, nivel de precios y servicios públicos. Una comparación de nuestros resultados con las conclusiones de Moretti relativas a los EE.UU., sugiere que las instituciones asociadas con el mercado laboral nacional ejercen influencia sobre la distribución de las ganancias salariales del acumulado de educación regional entre los trabajadores de los diferentes niveles de estudio. Un análisis por sector revela que los factores exógenos de capital humano son, en términos generales, más pronunciados en el sector de producción que en el de servicios.

Suggested Citation

  • Daniel Heuermann, 2011. "Human Capital Externalities in Western Germany," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(2), pages 139-165.
    • Handle: RePEc:taf:specan:v:6:y:2011:i:2:p:139-165
    DOI: 10.1080/17421772.2011.557775
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    1. Gabriel Felbermayr & Wido Geis & Wilhelm Kohler, 2014. "Restrictive Immigration Policy in Germany: Pains and Gains Foregone?," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 12, pages 395-419, World Scientific Publishing Co. Pte. Ltd..
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    1. Eppelsheimer, Johann & Jahn, Elke J. & Rust, Christoph, 2022. "The spatial decay of human capital externalities - A functional regression approach with precise geo-referenced data," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    2. Cui, Ying & Martins, Pedro S., 2021. "What drives social returns to education? A meta-analysis," World Development, Elsevier, vol. 148(C).
    3. Peters, Jan Cornelius, 2016. "Quantifying the effect of labor market size on learning externalities," Economics Working Papers 2016-11, Christian-Albrechts-University of Kiel, Department of Economics.
    4. Florian I. Schumacher & Joilson Dias & Edinaldo Tebaldi, 2014. "Two tales on human capital and knowledge spillovers: the case of the US and Brazil," Applied Economics, Taylor & Francis Journals, vol. 46(23), pages 2733-2743, August.
    5. B. Fingleton & P. Cheshire & H. Garretsen & D. Igliori & J. Le Gallo & P. McCann & J. McCombie & V. Monastiriotis & B. Moore & M. Roberts, 2011. "We Move into Distinguished Company," Spatial Economic Analysis, Taylor & Francis Journals, vol. 6(2), pages 133-138.
    6. Paul Verstraten, 2018. "The scope of the external return to higher education," CPB Discussion Paper 381, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Chauvin, Juan Pablo & Glaeser, Edward & Ma, Yueran & Tobio, Kristina, 2017. "What is different about urbanization in rich and poor countries? Cities in Brazil, China, India and the United States," Journal of Urban Economics, Elsevier, vol. 98(C), pages 17-49.
    8. Florian Immanuel Schumacher & Joilson Dias, 2011. "The Human Capital Function: Sectoralexternalities," Anais do XXXVIII Encontro Nacional de Economia [Proceedings of the 38th Brazilian Economics Meeting] 215, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    9. Charlie Karlsson & Börje Johansson & Roger R. Stough, 2012. "Introduction – Human Capital and Agglomeration," Chapters, in: Charlie Karlsson & Börje Johansson & Roger R. Stough (ed.), The Regional Economics of Knowledge and Talent, chapter 1, Edward Elgar Publishing.
    10. Losina Purnastuti & Ruhul Salim, 2015. "Externalities and the Social Return to Education in Indonesia," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 18(1), pages 53-74.
    11. Andrés Felipe Sarria A., 2018. "Externalidades de la educación bajo la estimación de modelos multinivel: un enfoque por tipo de trabajador," Revista de Economía del Caribe 17163, Universidad del Norte.
    12. John V. Winters, 2018. "Do higher levels of education and skills in an area benefit wider society?," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-10, December.
    13. Paul Verstraten, 2018. "The scope of the external return to higher education," CPB Discussion Paper 381.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    14. Rasmus Thönnessen & Erich Gundlach, 2013. "The size of human capital externalities: cross-country evidence," Public Choice, Springer, vol. 157(3), pages 671-689, December.
    15. Thönnessen, Rasmus, 2014. "Human capital externalities vs. substitution effects as determinants of regional wages: Evidence from German micro data," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100345, Verein für Socialpolitik / German Economic Association.
    16. Möller, Joachim & Eppelsheimer, Johann, 2016. "The Wage Effects of Regional Brain Gain and Brain Drain Revisited," VfS Annual Conference 2016 (Augsburg): Demographic Change 145506, Verein für Socialpolitik / German Economic Association.
    17. Filiztekin, Alpay, 2011. "Social returns to education in a developing country," MPRA Paper 35124, University Library of Munich, Germany.

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    More about this item

    Keywords

    Human capital externalities; regional wage differences; D62; J24; J31; O15;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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