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Do localization economies derive from human capital externalities?

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  • Christopher H. Wheeler

Abstract

One of the most robust findings emerging from studies of industrial agglomeration is the rise in productivity that tends to accompany it. What most studies have not addressed, however, is the potential role played by human capital externalities in driving this relationship. This paper seeks to do so using data from the 1980, 1990, and 2000 US Census covering a collection of 77 (primarily) 3-digit manufacturing industries across a sample of more than 200 metropolitan areas. The analysis generates two primary results. First, a variety of education- and experience-based measures of average human capital rise significantly as an industry's employment in a metropolitan area increases. Hence, clusters of industry do tend to be characterized by larger stocks of human capital. However, second, even after accounting for the level of human capital in a worker's own industry, the overall size of the industry remains strongly associated with wages. Such results suggest that localization economies are largely not the product of knowledge spillovers.

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  • Christopher H. Wheeler, 2005. "Do localization economies derive from human capital externalities?," Working Papers 2005-015, Federal Reserve Bank of St. Louis.
    • Handle: RePEc:fip:fedlwp:2005-015
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    Cited by:

    1. Aurélie LALANNE & Guillaume POUYANNE, 2012. "Ten years of metropolization in economics: a bibliometric approach (In French)," Cahiers du GREThA (2007-2019) 2012-11, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    2. Stephan Brunow & Georg Hirte, 2009. "The age pattern of human capital and regional productivity: A spatial econometric study on german regions," Papers in Regional Science, Wiley Blackwell, vol. 88(4), pages 799-823, November.
    3. Allen J. Scott, 2010. "Space-Time Variations of Human Capital Assets Across U.S. Metropolitan Areas, 1980 to 2000," Economic Geography, Taylor & Francis Journals, vol. 86(3), pages 233-249, July.
    4. Tuo Lin & Kevin Stolarick & Rong Sheng, 2019. "Bridging the Gap: Integrated Occupational and Industrial Approach to Understand the Regional Economic Advantage," Sustainability, MDPI, Open Access Journal, vol. 11(15), pages 1-1, August.
    5. Ren Lu & Torger Reve & Jing Huang & Ze Jian & Mei Chen, 2018. "A Literature Review Of Cluster Theory: Are Relations Among Clusters Important?," Journal of Economic Surveys, Wiley Blackwell, vol. 32(4), pages 1201-1220, September.
    6. Cui, Ying & Martins, Pedro S., 2020. "What drives social returns to education? A meta-analysis," GLO Discussion Paper Series 706, Global Labor Organization (GLO).

    More about this item

    Keywords

    Regional economics; Human capital;

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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