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Identifying Human Capital Externalities: Theory with an Application to US Cities

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  • Ciccone, Antonio
  • Peri, Giovanni

Abstract

Identification of the strength of human capital externalities at the aggregate level is still not fully understood. The existing method may yield positive or negative externalities even if wages reflect marginal social products. We propose an approach that yields positive average human capital externalities if and only if the marginal social product of workers with above-average human capital exceeds their wage. As an application, we estimate the strength of average-schooling externalities in US cities between 1970 and 1990.

Suggested Citation

  • Ciccone, Antonio & Peri, Giovanni, 2002. "Identifying Human Capital Externalities: Theory with an Application to US Cities," CEPR Discussion Papers 3350, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3350
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    More about this item

    Keywords

    Marginal social product of human capital; Wages; Human capital externalities; Imperfect substitution; Perfect substitution; Cities;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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