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Human Capital Spillovers in Manufacturing: Evidence from Plant-Level Production Functions

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  • Enrico Moretti

Abstract

I assess the magnitude of human capital spillovers in US cities by estimating plant-level production functions. I use a unique firm worker matched dataset, obtained by combining the Census of Manufacturers with the Census of Population. After controlling for a plant's own human capital, plant fixed effects, and industry specific and state specific transitory shocks, I find that the output of plants located in cities that experience large increases in the share of college graduates rises more than the output of smaller plants located in cities that experience small increases in the share of college graduates. Several specification tests indicate that the estimated effect is unlikely to be completely spurious. First, within a city, spillovers between plants that rarely interact are zero, while spillovers between plants that often interact are significant. Second, density of physical capital in a city outside a plant has no effect on a plant's productivity. Third, most of the estimated spillover comes from high-tech plants. For low-tech plants, the spillover is virtually zero. The estimated productivity differences between cities with high and low levels of human capital match remarkably well differences in labor costs between cities and high and low level of human capital. Consistent with a model that includes both standard general equilibrium forces and spillovers, the productivity gains generated by human capital spillover are offset by increased labor costs.

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  • Enrico Moretti, 2002. "Human Capital Spillovers in Manufacturing: Evidence from Plant-Level Production Functions," NBER Working Papers 9316, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9316
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    Cited by:

    1. Charlot, Sylvie & Duranton, Gilles, 2004. "Communication externalities in cities," Journal of Urban Economics, Elsevier, vol. 56(3), pages 581-613, November.
    2. Gustavo A. Crespi & Aldo Geuna & Lionel J. J. Nesta, 2006. "Labour Mobility of Academic Inventors. Career Decision and Knowledge Transfer," SPRU Working Paper Series 139, SPRU - Science Policy Research Unit, University of Sussex Business School.
    3. Alan Manning, 2004. "We Can Work It Out: the Impact of Technological Change on the Demand for Low Skill Workers," CEP Discussion Papers dp0640, Centre for Economic Performance, LSE.
    4. Esteban Rossi-Hansberg, 2004. "Optimal Urban Land Use and Zoning," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 69-106, January.
    5. Wang, Chunchao & Zhang, Chenglei & Ni, Jinlan, 2015. "Social network, intra-network education spillover effect and rural–urban migrants' wages: Evidence from China," China Economic Review, Elsevier, vol. 35(C), pages 156-168.
    6. Alan Manning, 2004. "We Can Work It Out: The Impact of Technological Change on the Demand for Low‐Skill Workers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(5), pages 581-608, November.
    7. Galindo-Rueda, Fernando & Haskel, Jonathan, 2005. "Skills, Workforce Characteristics and Firm-Level Productivity: Evidence from the Matched ABI/Employer Skills Survey," IZA Discussion Papers 1542, Institute of Labor Economics (IZA).
    8. Krammer, Sorin M.S., 2014. "Assessing the relative importance of multiple channels for embodied and disembodied technological spillovers," Technological Forecasting and Social Change, Elsevier, vol. 81(C), pages 272-286.
    9. Alexandra López-Cermeño, 2016. "Knowledge Shocks Diffusion and the Resilience of Regional Inequality," Working Papers 0096, European Historical Economics Society (EHES).
    10. Gustavo Crespi & Aldo Geuna & Lionel Nesta, 2007. "The mobility of university inventors in Europe," The Journal of Technology Transfer, Springer, vol. 32(3), pages 195-215, June.
    11. R. Jason Faberman, 2003. "Job Flows and Establishment Characteristics: Variations Across U.S. Metropolitan Areas," William Davidson Institute Working Papers Series 2003-609, William Davidson Institute at the University of Michigan.
    12. Navon, Guy, 2009. "Human Capital Spillovers in the Workplace: Labor Diversity and Productivity," MPRA Paper 17741, University Library of Munich, Germany.
    13. Caragliu, Andrea & Del Bo, Chiara, 2011. "Determinants of spatial knowledge spillovers in Italian provinces," Socio-Economic Planning Sciences, Elsevier, vol. 45(1), pages 28-37, March.

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    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • I2 - Health, Education, and Welfare - - Education

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