Productivity and the Density of Human Capital

51 Pages Posted: 24 Mar 2010 Last revised: 14 Sep 2011

See all articles by Jaison R. Abel

Jaison R. Abel

Federal Reserve Bank of New York

Ishita Dey

University of Georgia

Todd M. Gabe

University of Maine - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 12, 2011

Abstract

We estimate a model of urban productivity in which the agglomeration effect of density is enhanced by a metropolitan area’s stock of human capital. Estimation accounts for potential biases due to the endogeneity of density and industrial composition effects. Using new information on output per worker for U.S. metropolitan areas along with a measure of density that accounts for the spatial distribution of population, we find that a doubling of density increases productivity by 2 to 4 percent. Consistent with theories of learning and knowledge spillovers in cities, we demonstrate that the elasticity of average labor productivity with respect to density increases with human capital. Metropolitan areas with a human capital stock one standard deviation below the mean realize no productivity gain, while doubling density in metropolitan areas with a human capital stock one standard deviation above the mean yields productivity benefits that are about twice the average. These patterns are particularly pronounced in industries where the exchange of information and sharing of ideas are important parts of the production process.

Keywords: Agglomeration, Productivity, Density, Knowledge Spillovers

JEL Classification: R12, R30, J24, O40

Suggested Citation

Abel, Jaison R. and Dey, Ishita and Gabe, Todd M., Productivity and the Density of Human Capital (September 12, 2011). FRB of New York Staff Report No. 440. Available at SSRN: https://ssrn.com/abstract=1576593 or http://dx.doi.org/10.2139/ssrn.1576593

Jaison R. Abel (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Ishita Dey

University of Georgia ( email )

Department of Housing and Consumer Economics
Athens, GA 30606
United States

Todd M. Gabe

University of Maine - School of Economics ( email )

Orono, ME 04469-5774
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
124
Abstract Views
1,194
rank
229,475
PlumX Metrics