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Human Capital Spillovers and the Geography of Intergenerational Mobility

Author

Listed:
  • 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:

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    2. Özdemir Onur, 2023. "A Spillover Effect of Human Capital on Gross Capital Formation: A Quantile Regression Approach," Zagreb International Review of Economics and Business, Sciendo, vol. 26(1), pages 77-96.
    3. Fu, Chao & Guo, Junjie & Smith, Adam J. & Sorensen, Alan, 2022. "Students’ heterogeneous preferences and the uneven spatial distribution of colleges," Journal of Monetary Economics, Elsevier, vol. 129(C), pages 49-64.
    4. Irene Brunetti & Davide Fiaschi, 2023. "Occupational mobility: theory and estimation for Italy," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 21(3), pages 641-661, September.
    5. Brant Abbott & Giovanni Gallipoli, 2018. "Human Capital Inequality: Empirical Evidence," Working Papers 2018-085, Human Capital and Economic Opportunity Working Group.

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