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

Author Info

  • Ciccone, Antonio

    ()

    (Universitat Pompeu Fabra)

  • Peri, Giovanni

    ()

    (University of California, Davis)

Abstract

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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File URL: http://ftp.iza.org/dp488.pdf
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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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Keywords: wages; marginal social product of human capital; human capital externalities;

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Find related papers by 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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