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Schooling Externalities, Technology and Productivity:Theory and Evidence from U.S. States

Author

Listed:
  • Giovanni Peri
  • Susana Iranzo

    (Department of Economics, University of California Davis)

Abstract

The recent literature on externalities of schooling in the U.S. is rather mixed: positive external effectsof average education are hardly found at all, while often positive externalities from the share of collegegraduates are identified. This paper proposes a simple model to explain this fact and tests it using U.S.states data. The key idea is that advanced technologies, associated with high total factor productivity andhigh returns to skills, are complementary to highly educated workers, as opposed to traditional technologies,complementary to less educated. Our calibrated model predicts that workers with twelve years of schooling(high school graduates) are indifferent between traditional and advanced technologies, while more educatedworkers adopt the advanced technologies and benefit from the larger private and social returns associatedto them. Only shifts in education above high school graduation are therefore associated with positive socialreturns stemming from more efficient technologies. The empirical analysis, using compulsory attendancelaws, immigration of highly educated workers and the location of land-grant colleges as instruments confirmthat an increase in the share of college graduates, but not an increase in the share of high school graduates,had large positive production externalities in U.S. States.

Suggested Citation

  • Giovanni Peri & Susana Iranzo, 2006. "Schooling Externalities, Technology and Productivity:Theory and Evidence from U.S. States," Working Papers 127, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:127
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    More about this item

    JEL classification:

    • 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
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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