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Human Capital Spillovers and the Geography of Intergenerational Mobility

Author

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  • Brant Abbott

    (Yale University)

  • Giovanni Gallipoli

    (UBC)

Abstract

We develop and estimate an equilibrium model of geographic variation in the intergenerational earnings elasticity (IGE). The theory extends the Becker-Tomes model, introducing a production sector in which human capital inputs are strategic complements. We show that the equilibrium return to human capital investments is lower in places where strategic complementarity is more intense, and that this is associated with less intergenerational persistence (lower IGEs). Furthermore, optimal education policies are more progressive where these complementarities are stronger, leading to a negative correlation between progressive public policy and IGEs. Using microdata we construct various location-specific measures of skill complementarity and document that the patterns of geographic variation in IGEs are consistent with our hypothesis. Quantitatively, geographic differences in skill complementarity account for up to 1/5 of cross-country variation in intergenerational earnings persistence. Governments in countries where prominent industries exhibit greater skill complementarities tend to spend larger fractions of GDP on public education, suggesting that underlying technology differences may indirectly explain an even larger proportion of cross-country IGE variation.

Suggested Citation

  • Brant Abbott & Giovanni Gallipoli, 2015. "Human Capital Spillovers and the Geography of Intergenerational Mobility," 2015 Meeting Papers 319, Society for Economic Dynamics.
  • Handle: RePEc:red:sed015:319
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    References listed on IDEAS

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    Cited by:

    1. Brant Abbott & Giovanni Gallipoli, 2018. "Human Capital Inequality: Empirical Evidence," Working Papers 2018-085, Human Capital and Economic Opportunity Working Group.
    2. Rainald Borck & Matthias Wrede, 2018. "Spatial and social mobility," Journal of Regional Science, Wiley Blackwell, vol. 58(4), pages 688-704, September.

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