Paper #494

Title:

Human capital and externalities in cities

Authors:

Antonio Ciccone and Giovanni Peri

Date:

January 1999 (Revised: 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-parametically) even if workers with different levels of human capital are imperfect substitutes in production.

Keywords:

Human capital, externalities, imperfect substitution

JEL codes:

O0, O4, R0, J3

Area of Research:

Macroeconomics and International Economics

Published in:

Review of Economic Studies, 73 (2), 381-412, 2006
With the title:
Identifying Human Capital Externalities: Theory with an Application to US cities

Download the paper in PDF format