External Effects of Education: Human Capital Spillovers in Regions and Firms

26 Pages Posted: 3 Sep 2010

See all articles by Thomas K. Bauer

Thomas K. Bauer

Rhine-Westphalia Institute for Economic Research (RWI-Essen); University of Bochum - Faculty of Economics; IZA Institute of Labor Economics

Matthias Vorell

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Date Written: July 1, 2010

Abstract

Using a matched employer-employee panel dataset for Germany, we analyze the external effects of education on individual wages. Following the basic framework of Moretti (2004), we allow spillover effects to occur both within a specific firm and a specific region rather than analyzing spillover effects only on a regional level. Controlling for individual- and firm-specific fixed effects and using an instrumental variable strategy, our results confirm the existence of positive but small external effects of human capital. Positive spillover effects within firms occur only for the group of high-skilled workers.

Keywords: External effects, human capital, employer-employee matched data

JEL Classification: C23, D62, J31

Suggested Citation

Bauer, Thomas K. and Vorell, Matthias, External Effects of Education: Human Capital Spillovers in Regions and Firms (July 1, 2010). Ruhr Economic Paper No. 195, Available at SSRN: https://ssrn.com/abstract=1670589 or http://dx.doi.org/10.2139/ssrn.1670589

Thomas K. Bauer

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
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University of Bochum - Faculty of Economics ( email )

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IZA Institute of Labor Economics ( email )

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Matthias Vorell (Contact Author)

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

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