Capital, Wages, and Growth: Theory and Evidence

IGIER Working Paper No. 152

53 Pages Posted: 3 Aug 1999

See all articles by Antonio Ciccone

Antonio Ciccone

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Douglas Almond

Columbia University - Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Giovanni Peri

University of California, Davis - Department of Economics

Date Written: May 1999

Abstract

Returns to scale to capital and the strength of capital externalities play a key role for the empirical predictions and policy implications of different growth theories. We show that both can be identified with individual wage data and implement our approach at the city-level using US Census data on individuals in 173 cities for 1970, 1980, and 1990. Estimation takes into account fixed effects, endogeneity of capital accumulation, and measurement error. We find no evidence for human or physical capital externalities and decreasing aggregate returns to capital. Returns to scale to physical and human capital are around 80 percent. We also find strong complementarities between human capital and labor and substantial total employment externalities.

JEL Classification: O0, O4, R0, J3

Suggested Citation

Ciccone, Antonio and Almond, Douglas Vincent and Peri, Giovanni, Capital, Wages, and Growth: Theory and Evidence (May 1999). IGIER Working Paper No. 152. Available at SSRN: https://ssrn.com/abstract=168308 or http://dx.doi.org/10.2139/ssrn.168308

Antonio Ciccone (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
+34 93 542 1669 (Phone)
+34 93 542 1746 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Douglas Vincent Almond

Columbia University - Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
International Affairs Building, MC 3308
New York, NY 10027
United States
212-854-3239 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Giovanni Peri

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-3033 (Phone)
530-752-9382 (Fax)

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