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Endogenous Growth, Human Capital, and Industry Wages

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  • Winter-Ebmer, Rudolf

Abstract

Lucas' 1988 model of the external effects of human capital formation is used as a starting point for an analysis of the impact of human capital on wages. Most empirical tests of new growth theory are based on time-series and cross-section data. This paper suggests a microeconometric approach to test Lucas' basic assumption of external effects of human capital. First, the internal effects of education are filtered out using wage functions for individuals. Second, the resulting industry wage premiums are regressed on industry-specific characteristics and, above all, on average human capital in the industry, to account for the external effects of human capital. The hypothesis is corroborated for Austria data. Finally, alternative hypotheses such as self-selection or varying individual human capital productivity in different sectors are examined.

Suggested Citation

  • Winter-Ebmer, Rudolf, 1992. "Endogenous Growth, Human Capital, and Industry Wages," CEPR Discussion Papers 714, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:714
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    Cited by:

    1. Gruetter, Max & Lalive, Rafael, 2009. "The importance of firms in wage determination," Labour Economics, Elsevier, vol. 16(2), pages 149-160, April.
    2. Vassilis Monastiriotis, 2002. "Human capital and wages: evidence for external effects from the UK regions," Applied Economics Letters, Taylor & Francis Journals, vol. 9(13), pages 843-846.
    3. Ozan Bakis & Nurhan Davutyan & Haluk Levent & Sezgin Polat, 2010. "External Returns to Higher Education in Turkey," Working Papers 517, Economic Research Forum, revised 04 Jan 2010.
    4. Winter-Ebmer, Rudolf & Zweimuller, Josef, 1999. "Intra-Firm Wage Dispersion and Firm Performance," Kyklos, Wiley Blackwell, vol. 52(4), pages 555-572.
    5. Winter-Ebmer, Rudolf, 1996. "Wage curve, unemployment duration and compensating differentials," Labour Economics, Elsevier, vol. 3(4), pages 425-434, December.
    6. Zweimuller, Josef & Barth, Erling, 1994. "Bargaining Structure, Wage Determination, and Wage Dispersion in 6 OECD Countries," Kyklos, Wiley Blackwell, vol. 47(1), pages 81-93.
    7. Kirby, Simon & Riley, Rebecca, 2008. "The external returns to education: UK evidence using repeated cross-sections," Labour Economics, Elsevier, vol. 15(4), pages 619-630, August.
    8. Barth, Erling & Zweimuller, Josef, 1992. "Labor Market Institutions and the Industry Wage Distribution: Evidence from Austria, Norway, and the U.S," Institute for Research on Labor and Employment, Working Paper Series qt1811h146, Institute of Industrial Relations, UC Berkeley.
    9. Sascha Sardadvar & Christian Reiner, 2017. "Does the presence of high-skilled employees increase total and high-skilled employment in the long run? Evidence from Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(1), pages 59-89, February.
    10. Chris Sakellariou, 2001. "Identifying the external effects of human capital: a two-stage approach," Applied Economics Letters, Taylor & Francis Journals, vol. 8(3), pages 191-194.
    11. Chris Sakellariou & Ramin Maysami, 2004. "Lucas type external effects of human capital: strong evidence using microdata," Applied Economics Letters, Taylor & Francis Journals, vol. 11(6), pages 343-346.
    12. Louis Lévy-Garboua, 1994. "Formation sur le tas et rendements de l'expérience : un modèle de diffusion du savoir," Économie et Prévision, Programme National Persée, vol. 116(5), pages 79-88.
    13. World Bank, 2003. "Lifelong Learning in the Global Knowledge Economy : Challenges for Developing Countries," World Bank Publications, The World Bank, number 15141, April.
    14. Zanchi, Luisa, 1998. "Interindustry wage differentials in dummy variable models," Economics Letters, Elsevier, vol. 60(3), pages 297-301, September.
    15. Kevin Reilly & Luisa Zanchi, 2002. "Industry Wage Differentials: How Many, Big and Significant Are They?," Labor and Demography 0209001, EconWPA.
    16. Michael Shields & Gail Shields, 2009. "Estimating external returns to education in the US: a production function approach," Applied Economics Letters, Taylor & Francis Journals, vol. 16(11), pages 1089-1092.
    17. Shields, Michael P., 2008. "Why Should State Government Invest in College Education? An Equilibrium Approach for the US in 2000," IZA Discussion Papers 3569, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Endogenous Growth; External Effects; Human Capital; Industry Wage Differentials;

    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
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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