Human Capital Externalities in Cities

62 Pages Posted: 25 Apr 2003  

Enrico Moretti

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: April 2003

Abstract

What is the effect of an increase in the overall level of human capital on the economy of a city? Although much is known about the private return to education, much less is known about the more important question of what happens to productivity, wages and land prices when the aggregate stock of human capital in a city increases. Increases in the aggregate stock of human capital can benefit society in ways that are not fully reflected in the private return of education. Human capital spillovers can in theory increase aggregate productivity over and above the direct effect of human capital on individual productivity. Furthermore, increases in education can reduce criminal participation and improve voters' political behavior. In this paper, I review what we know about social returns to education, with a particular emphasis on those externalities that accrue to local geographic areas. The focus of the paper is on the empirical issues that arise in identifying these externalities and on the existing empirical evidence on their magnitude. This paper was prepared as a chapter for the forthcoming Handbook of Urban and Regional Economics.

Suggested Citation

Moretti, Enrico, Human Capital Externalities in Cities (April 2003). NBER Working Paper No. w9641. Available at SSRN: https://ssrn.com/abstract=398545

Enrico Moretti (Contact Author)

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

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://emlab.berkeley.edu/~moretti/

National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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