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Identifying Human Capital Externalities. Theory with Applications

Author

Listed:
  • Ciccone Antonio

    () (POMPEU FABRA UNIVERSITY)

  • Peri Giovanni

    () (UNIVERSITY OF CALIFORNIA)

Abstract

The identification of aggregate human capital externalities is still not fully understood. The existing (Mincerian) approach confuses positive externalities with wage changes due to a downward sloping demand curve for human capital. As a result, it yields positive externalities even when wages equal marginal social products. We propose an approach that identifies human capital externalities whether or not aggregate demand for human capital slopes downward. Another advantage of our approach is that it does not require estimates of the individual return to human capital. Applications to US cities and states between 1970 and 1990 yield no evidence of significant average-schooling externalities.

Suggested Citation

  • Ciccone Antonio & Peri Giovanni, 2007. "Identifying Human Capital Externalities. Theory with Applications," Working Papers 201098, Fundacion BBVA / BBVA Foundation.
  • Handle: RePEc:fbb:wpaper:201098
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    References listed on IDEAS

    as
    1. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
    2. Costas Azariadis & Allan Drazen, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 501-526.
    3. Roland BĂ©nabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
    4. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
    5. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
    6. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 779-804.
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    More about this item

    Keywords

    Human capital; externalities; wages; downward sloping labor demand.;

    JEL classification:

    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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