Human Capital and Externalities in Cities

Univ. Pompeu Fabra, Economics Working Paper No. 494

48 Pages Posted: 19 Sep 2000

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)

Giovanni Peri

University of California, Davis - Department of Economics

Date Written: October 2000

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-parametrically) even if workers with different levels of human capital are imperfect substitutes in production.

Keywords: aggregate return to human capital, human capital externalities, decreasing returns to human capital, imperfect substitution, perfect substitution, scale externalities, cities

JEL Classification: O0, O4, R0, J3

Suggested Citation

Ciccone, Antonio and Peri, Giovanni, Human Capital and Externalities in Cities (October 2000). Univ. Pompeu Fabra, Economics Working Paper No. 494. Available at SSRN: https://ssrn.com/abstract=242708 or http://dx.doi.org/10.2139/ssrn.242708

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

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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