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Human capital and externalities in cities

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Abstract
We combine growth theory with US Census data on individual schooling and wages to estimate the aggregate return to human capital and human capital externalities in cities. Our estimates imply that a one-year increase in average schooling in cities increases their aggregate labor productivity by 8 to 11 percent. We find no evidence for aggregate human capital externalities in cities however although we use three different approaches. Our main theoretical contribution is to show how human capital externalities can be identified (non-parametically) even if workers with different levels of human capital are imperfect substitutes in production.

Suggested Citation

  • Antonio Ciccone & Giovanni Peri, 1999. "Human capital and externalities in cities," Economics Working Papers 494, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2000.
    • Handle: RePEc:upf:upfgen:494
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    More about this item

    Keywords

    Human capital; externalities; imperfect substitution;
    All these keywords.

    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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