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Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital

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  • Jesse M. Shapiro

Abstract

From 1940 to 1990, a 10 percent increase in a metropolitan area's concentration of college-educated residents was associated with a .8 percent increase in subsequent employment growth. Instrumental variables estimates support a causal relationship between college graduates and employment growth, but show no evidence of an effect of high school graduates. Using data on growth in wages, rents and house values, I calibrate a neoclassical city growth model and find that roughly 60 percent of the employment growth effect of college graduates is due to enhanced productivity growth, the rest being caused by growth in the quality of life. This finding contrasts with the common argument that human capital generates employment growth in urban areas solely through changes in productivity.

Suggested Citation

  • Jesse M. Shapiro, 2005. "Smart Cities: Quality of Life, Productivity, and the Growth Effects of Human Capital," NBER Working Papers 11615, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11615
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    1. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 779-804.
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    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • N92 - Economic History - - Regional and Urban History - - - U.S.; Canada: 1913-
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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