Indentifying Human Capital Externalities: Theory with an Application to Us Cities

Universitat Pompeu Economics and Business Working Paper No. 611

Posted: 7 Nov 2002

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

Abstract

Identification of the strength of human capital externalities at the aggregate level is still not fully understood. The existing method may yield positive or negative externalities even if wages reflect marginal social products. We propose an approach that yields positive average human capital externalities if and only if the marginal social product of workers with above-average human capital exceeds their wage. As an application, we estimate the strength of average-schooling externalities in US cities between 1970 and 1990.

Keywords: Marginal social product of human capital, wages, human capital externalities, imperfect substitution, perfect substitution, cities

JEL Classification: O0, O4, R0, J3

Suggested Citation

Ciccone, Antonio and Peri, Giovanni, Indentifying Human Capital Externalities: Theory with an Application to Us Cities. Universitat Pompeu Economics and Business Working Paper No. 611. Available at SSRN: https://ssrn.com/abstract=311589

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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