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

  • Ciccone, Antonio

    ()

    (Universitat Pompeu Fabra)

  • Peri, Giovanni

    ()

    (University of California, Davis)

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 aboveaverage human capital exceeds their wage. As an application, we estimate the strength of average-schooling externalities in US cities between 1970 and 1990.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 488.

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Length: 53 pages
Date of creation: Apr 2002
Date of revision:
Publication status: published in: Review of Economic Studies, 73 (2), 2006, 381-412
Handle: RePEc:iza:izadps:dp488
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  18. Alan Krueger & Mikael Lindahl, 2000. "Education for Growth: Why and For Whom?," Working Papers 808, Princeton University, Department of Economics, Industrial Relations Section..
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  25. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  26. 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.).
  27. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
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