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Firm-Level Social Returns to Education

  • Martins, Pedro S.

    ()

    (Queen Mary, University of London)

Do workers benefit from the education of their co-workers? This question is examined first by introducing a model of on-the-job schooling, which argues that educated workers may transfer part of their general skills to uneducated workers and that this spillover is affected by the degrees of non-excludability, irreversibility and generality of those skills. We then conduct an empirical analysis drawing on a matched panel of Portuguese firms and their workers. Schooling endogeneity is tackled by considering firm fixed effects and instruments based on schooling lags and the lagged share of retirement-age workers. We find evidence of large firm-level social returns (ranging between 14% and 23% – and thus exceeding standard estimates of private returns) and of significant returns accruing to less educated workers but not to their more educated colleagues.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1382.

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Length: 47 pages
Date of creation: Nov 2004
Date of revision:
Publication status: published in: Journal of Population Economics, 2010, 23(2), 539-558
Handle: RePEc:iza:izadps:dp1382
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  1. Pedro Carneiro & Karsten T. Hansen & James J. Heckman, 2003. "Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College," NBER Working Papers 9546, National Bureau of Economic Research, Inc.
  2. Lance Lochner & Enrico Moretti, 2001. "The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports," NBER Working Papers 8605, National Bureau of Economic Research, Inc.
  3. Francis Kramarz, 2003. "Wages and International Trade," Working Papers 2003-27, Centre de Recherche en Economie et Statistique.
  4. Pedro Martins, 2009. "Rent sharing before and after the wage bill," Applied Economics, Taylor & Francis Journals, vol. 41(17), pages 2133-2151.
  5. Ashenfelter, Orley & Krueger, Alan B, 1994. "Estimates of the Economic Returns to Schooling from a New Sample of Twins," American Economic Review, American Economic Association, vol. 84(5), pages 1157-73, December.
  6. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
  7. Alan B. Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," NBER Working Papers 7591, National Bureau of Economic Research, Inc.
  8. Blanchflower, David G & Oswald, Andrew J & Sanfey, Peter, 1996. "Wages, Profits, and Rent-Sharing," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 227-51, February.
  9. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
  10. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
  11. Vieira, Jose A. C., 1999. "Returns to education in Portugal," Labour Economics, Elsevier, vol. 6(4), pages 535-541, November.
  12. James Heckman & Pedro Carneiro, 2003. "Human Capital Policy," NBER Working Papers 9495, National Bureau of Economic Research, Inc.
  13. Jeremy Rudd, 2000. "Empirical evidence on human capital spillovers," Finance and Economics Discussion Series 2000-46, Board of Governors of the Federal Reserve System (U.S.).
  14. Jere R. Behrman & Mark R. Rosenzweig, 2002. "Does Increasing Women's Schooling Raise the Schooling of the Next Generation?," American Economic Review, American Economic Association, vol. 92(1), pages 323-334, March.
  15. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
  16. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  17. Harmon, Colm & Walker, Ian, 1995. "Estimates of the Economic Return to Schooling for the United Kingdom," American Economic Review, American Economic Association, vol. 85(5), pages 1278-86, December.
  18. Daron Acemoglu & Joshua Angrist, 2001. "How Large are Human-Capital Externalities? Evidence from Compulsory-Schooling Laws," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 9-74 National Bureau of Economic Research, Inc.
  19. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  20. Daron Acemoglu & Joern-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," Working papers 98-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. Trostel, P. & Walker, I., 2000. "Education and Work," The Warwick Economics Research Paper Series (TWERPS) 554, University of Warwick, Department of Economics.
  22. Enrico Moretti, 2002. "Estimating the Social Return to Higher Education: Evidence From Longitudinal and Repeated Cross-Sectional Data," NBER Working Papers 9108, National Bureau of Economic Research, Inc.
  23. Antonio Ciccone & Giovanni Peri, 2002. "Indentifying human capital externalities: Theory with an application to US cities," Economics Working Papers 611, Department of Economics and Business, Universitat Pompeu Fabra, revised Jul 2005.
  24. Carneiro, Pedro & Hansen, Karsten & Heckman, James, 2003. "Estimating distributions of treatment effects with an application to the returns to schooling and measurement of the effects of uncertainty on college choice," Working Paper Series 2003:9, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  25. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August.
  26. Arai, Mahmood, 1999. "Wages, Profits and Capital Intensity: Evidence from Matched Worker-Firm Data," Research Papers in Economics 1999:3, Stockholm University, Department of Economics.
  27. Hogan, Vincent & Ian Walker, 2002. "Education Choice under Uncertainty," Royal Economic Society Annual Conference 2002 103, Royal Economic Society.
  28. Martins, Pedro S. & Novo, Alvaro A. & Portugal, Pedro, 2009. "Increasing the Legal Retirement Age: The Impact on Wages, Worker Flows and Firm Performance," IZA Discussion Papers 4187, Institute for the Study of Labor (IZA).
  29. Kevin Milligan & Enrico Moretti & Philip Oreopoulos, 2003. "Does Education Improve Citizenship? Evidence from the U.S. and the U.K," NBER Working Papers 9584, National Bureau of Economic Research, Inc.
  30. Martins, Pedro S. & Pereira, Pedro T., 2004. "Does education reduce wage inequality? Quantile regression evidence from 16 countries," Labour Economics, Elsevier, vol. 11(3), pages 355-371, June.
  31. Janet Currie & Enrico Moretti, 2003. "Mother'S Education And The Intergenerational Transmission Of Human Capital: Evidence From College Openings," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1495-1532, November.
  32. Pereira, Pedro T. & Martins, Pedro S., 2001. "Is there a Return-Risk Link in Education?," IZA Discussion Papers 321, Institute for the Study of Labor (IZA).
  33. Harminder Battu & Clive R. Belfield & Peter J. Sloane, 2003. "Human Capital Spillovers within the Workplace: Evidence for Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 575-594, December.
  34. Vincent Hogan & Ian Walker, 2003. "Education Choice under Uncertainty and Public Policy," Working Papers 200302, School Of Economics, University College Dublin.
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