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Where do human capital externalities end up?

Author

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  • Alberto Dalmazzo

    () (University of Siena)

  • Guido de Blasio

    () (Bank of Italy)

Abstract

Recent literature has aimed at evaluating human capital externalities by estimating the effect of human capital on wages at urban level. We argue that this methodology might not identify properly human capital spillovers. We consider a general equilibrium model based on Roback (1982) where both wages and rents are simultaneously determined at the local level. We show that human capital externalities cannot be identified unless the joint effect of local human capital on both wages and rents is considered. Empirically, we study the effects of local human capital on household-level rents and individual-level wages for a sample of Italian local labour markets. Our results show a positive and robust effect of local human capital on rents. This unambiguously demonstrates that the concentration of human capital at the local level generates positive externalities. As for the relative importance of consumption and production externalities, our results suggest that the two effects have a similar impact on wages.

Suggested Citation

  • Alberto Dalmazzo & Guido de Blasio, 2005. "Where do human capital externalities end up?," Temi di discussione (Economic working papers) 554, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_554_04
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    Cited by:

    1. Esteban Sanroma & Raul Ramos, 2007. "Local Human Capital and Productivity: An Analysis for the Spanish Regions," Regional Studies, Taylor & Francis Journals, vol. 41(3), pages 349-359.
    2. Francesco Giffoni & Matteo Gomellini & Dario Pellegrino, 2017. "Human capital and urban growth in Italy, 1981-2001," Temi di discussione (Economic working papers) 1127, Bank of Italy, Economic Research and International Relations Area.
    3. Alberto Dalmazzo & Guido Blasio, 2007. "Production and consumption externalities of human capital: an empirical study for Italy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(2), pages 359-382, April.

    More about this item

    Keywords

    human capital; externalities; local markets;

    JEL classification:

    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • J0 - Labor and Demographic Economics - - General
    • I2 - Health, Education, and Welfare - - Education

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