Working Paper: CEPR ID: DP17374
Authors: Francesco Berlingieri; Christina Gathmann; Matthias Quinckhardt
Abstract: We study how the presence of a college affects the local economy using administrative data. Our analysis exploits the opening of new institutions of tertiary education across Germany in the 1980s and 1990s. The new college substantially increased the student population and share of high-skilled workers in the region. Yet, we find no effect on regional wages or employment indicating that the local economies did not experience additional growth through skill-biased technological change, for instance. Instead, there is sizable heterogeneity in the local gains: high-tech firms in manufacturing absorb most of the new college graduates, esp. in engineering professions. We find little impact on the low- or high-skilled service sector or employment in managerial professions. Finally, we show that local labor market conditions prior to the opening matter: in regions with a more dynamic labor market, the opening encourages firm creation and a permanent upskilling of the workforce. Areas with a less dynamic labor market experience little sustained growth in high-skilled workers who are absorbed by incumbent firms.
Keywords: college; local labor markets; human capital; substitutability
JEL Codes: J24; J31; J61; I23; I25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Opening of a technical college (I23) | Significant and sustained increase in the local student population (I23) |
| Significant and sustained increase in the local student population (I23) | Increase in young high-skilled employment (J24) |
| Opening of a technical college (I23) | No significant change in wages for high-skilled workers (J31) |
| Opening of a technical college (I23) | New high-skilled labor absorbed by high-tech manufacturing firms (J24) |
| Local labor market conditions prior to opening (J23) | Outcomes of college openings (I23) |
| Dynamic markets (D52) | Permanent growth in high-skilled workers (J69) |
| Stagnant regions (R11) | Minimal sustained growth in high-skilled workers (J24) |