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Human capital externalities in Indonesian cities

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  • Hashiguchi, Yoshihiro
  • Higashikata, Takayuki

Abstract

Using Indonesian plant-level manufacturing data for 1996 and 2006, this study estimates the external benefits of human capital investment. The external benefits are identified from the relationship between plant-level wages and city-level human capital stock, after controlling for workers’ skill levels, plant fixed effects, and time-varying industry fixed effects. Our results suggest that the degree of human capital externalities depends on the size of the urban population, and that such externalities do not occur in cities that either too large or too small. In the case of the Indonesian manufacturing industry, evidence of human capital externalities is observed in cities with a population of between 500 thousand and 1,500 thousand.

Suggested Citation

  • Hashiguchi, Yoshihiro & Higashikata, Takayuki, 2017. "Human capital externalities in Indonesian cities," IDE Discussion Papers 672, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper672
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    References listed on IDEAS

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    Cited by:

    1. Higashikata, Takayuki & Hashiguchi, Yoshihiro, 2017. "The causal effect of urbanization on rural poverty reduction: quasi-experimental evidence using Indonesian urban area data," IDE Discussion Papers 673, Institute of Developing Economies, Japan External Trade Organization(JETRO).

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    More about this item

    Keywords

    Indonesia; Human resources; Urban societies; Human capital externalities; Urban areas; Plant-level data;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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