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Human Capital and Externalities in Cities

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  • Ciccone, Antonio
  • Peri, Giovanni

Abstract

We combine growth theory with US Census data on individual schooling and wages to estimate the aggregate return to human capital and human capital externalities in cities. Our estimates imply that a one year increase in average schooling in cities increases their aggregate labour productivity by 8 to 11%. We find no evidence for aggregate human capital externalities in cities however, although we use three different approaches. Our main theoretical contribution is to show how human capital externalities can be identified (non-parametrically) even if workers with different levels of human capital are imperfect substitutes in production.

Suggested Citation

  • Ciccone, Antonio & Peri, Giovanni, 2000. "Human Capital and Externalities in Cities," CEPR Discussion Papers 2599, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2599
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Aggregate return to human capital; Human capital externalities; Decreasing returns to human capital; Imperfect substitution; Perfect substitution; Scale externalities; Cities;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General

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