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Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital

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  • Jesse M. Shapiro

Abstract

From 1940 to 1990, a 10% increase in a metropolitan area's concentration of college-educated residents was associated with a 0.8% increase in subsequent employment growth. Instrumental variables estimates support a causal relationship between college graduates and employment growth, but show no evidence of an effect of high school graduates. Using data on growth in wages, rents, and house values, I calibrate a neoclassical city growth model and find that roughly 60% of the employment growth effect of college graduates is due to enhanced productivity growth, the rest being caused by growth in the quality of life. This finding contrasts with the common argument that human capital generates employment growth in urban areas solely through changes in productivity. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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  • Jesse M. Shapiro, 2006. "Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 324-335, May.
  • Handle: RePEc:tpr:restat:v:88:y:2006:i:2:p:324-335
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    References listed on IDEAS

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    1. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 779-804.
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    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • N92 - Economic History - - Regional and Urban History - - - U.S.; Canada: 1913-
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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