Working Paper: CEPR ID: DP3350
Authors: Antonio Ciccone; Giovanni Peri
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: cities; human capital externalities; imperfect substitution; marginal social product of human capital; perfect substitution; wages
JEL Codes: J30; O00; O40; R00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| average human capital (J24) | average wages (J31) |
| average schooling (I21) | average human capital (J24) |
| average schooling (I21) | average wages (J31) |
| increase in average schooling (I21) | mover-stayer wage differential (J31) |
| average schooling (I21) | average human capital externalities (J24) |