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The scope of the external return to higher education

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  • Paul Verstraten

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

This article examines whether the productivity spillovers from a large share of highly educated workers occur within regions, sectors and/or firms. To distinguish between these possibilities, I follow a two-stage procedure to estimate a Mincerian wage equation using matched employer-employee panel data on individual earnings and educational attainment. The results indicate that the scope of higher education spillovers is very limited. Most of the identified spillovers occur within firms, being a factor of 2-3 larger than those operating outside the firm. The spillovers that take place outside the firm are restricted within the own sector and only occur on short distances from the working place. The limited scope confirms the view that higher education spillovers foster aggregate productivity through the exchange of tacit knowledge, which is heavily dependent on face-to-face contact.

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  • Paul Verstraten, 2018. "The scope of the external return to higher education," CPB Discussion Paper 381, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:381
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    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
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education

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