Indentifying human capital externalities: Theory with an application to US cities

The identification of aggregate human capital externalities is still not fully understood. The existing (Mincerian) approach confounds positive externalities with wage changes due to a downward sloping demand curve for human capital. As a result, it yields positive externalities even when wages equal marginal social products. We propose an approach that identifies human capital externalities whether or not aggregate demand for human capital slopes downward. Another advantage of our approach is that it does not require estimates of the individual return to human capital. Applications to US cities and states between 1970 and 1990 yield no evidence of significant average -schooling externalities.

Human Capital Externalities in the Canadian Metropolitan Areas: How Do We Measure Human Capital?

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Human Capital Externalities and Private Returns to Education in Kenya

We use micro data to analyse the effect of human capital externality on earnings and private returns to education. The earnings equations are estimated using the OLS method for a sample of full-time workers. The results show that human capital has a positive effect on earnings, indicating that an increase in education benefits all workers. However, men benefit more from women's education than the women do from men's. The effects of human capital externality on private returns to schooling are shown to vary substantially between rural and urban areas and across levels of the education system.

Optimal debt, endogenous fertility, and human capital externalities in a model with altruistic bequests

and human capital externalities. Because of such externalities, education investment is too low and fertility is too high. While education subsidies are the conventional means to deal with these problems, we show that the optimal policy also comprises debt even when distortionary taxes are used. The reason is that debt tips the usual trade-off between children's quantity and quality in favor of the latter by increasing the bequest cost of children. The optimal debt-output ratio exceeds 10% for plausible parameterization. (C) 2002 Elsevier B.V. All rights reserved.

Second-best public debt with human capital externalities

This paper studies optinnal public debt in a dynastic model with human capital externalities that cause human capital investment (fertility) to be below (above) its socially optimal level. By reducing fertility and raising human capital investment, the optimal debt can exceed 10% of output for plausible parameterizations.

Human capital and externalities in cities

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 althoughwe 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.

Capital, Wages, and Growth: Theory and Evidence

Returns to scale to capital and the strength of capital externalities play a key role for the empirical predictions and policy implications of different growth theories. We show that both can be identified with individual wage data and implement our approach at the city-level using US Census data on individuals in 173 cities for 1970, 1980, and 1990. Estimation takes into account fixed effects, endogeneity of capital accumulation, and measurement error. We find no evidence for human or physical capital externalities and decreasing aggregate returns to capital. Returns to scale to physical and human capital are around 80 percent. We also find strong complementarities between human capital and labor and substantial total employment externalities.

Capital, wages and growth: Theory and evidence

Returns to scale to capital and the strength of capital externalities play a key role for the empirical predictions and policy implications of different growth theories. We show that both can be identified with individual wage data and implement our approach at the city-level using US Census data on individuals in 173 cities for 1970, 1980, and 1990. Estimation takes into account fixed effects, endogeneity of capital accumulation, and measurement error. We find no evidence for human or physical capital externalities and decreasing aggregate returns to capital. Returns to scale to physical and human capital are around 80 percent. We also find strong complementarities between human capital and labor and substantial total employment externalities.

Human capital and regional development

We investigate the determinants of regional development using a newly constructed database of 1569 sub-national regions from 110 countries covering 74 percent of the world s surface and 97 percent of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural, and human capital determinants of regional development with an examination of productivity in several thousand establishments located in these regions. To organize the discussion, we present a new model of regional development that introduces into a standard migration framework elements of both the Lucas (1978) model of the allocation of talent between entrepreneurship and work, and the Lucas (1988) model of human capital externalities. The evidence points to the paramount importance of human capital in accounting for regional differences in development, but also suggests from model estimation and calibration that entrepreneurial inputs and possibly human capital externalities help understand the data.

Externalities and interdependent growth: Theory and evidence

I formulate and estimate a model of externalities within countriesand technological interdependence across countries. I find that externalreturns to scale to physical capital within countries are 8 percent; thata 10 percent increase of total factor productivity of a country's neighborsraises its total factor productivity by 6 percent; and that a 2 percentannual growth rate of labor productivity can be explained as an endogenousresponse to an exogenous 0.2 percent annual growth rate of total factorproductivity in the steady--state.

Welfare Implications of Public Education Spending Rules

In this paper, we quantitatively assess the welfare implications of alternative public education spending rules. To this end, we employ a dynamic stochastic general equilibrium model in which human capital externalities and public education expenditures, nanced by distorting taxes, enhance the productivity of private education choices. We allow public education spending, as share of output, to respond to various aggregate indicators in an attempt to minimize the market imperfection due to human capital externalities. We also expose the economy to varying degrees of uncertainty via changes in the variance of total factor productivity shocks. Our results indicate that, in the face of increasing aggregate uncertainty, active policy can signi cantly outperform passive policy (i.e. maintaining a constant public education to output ratio) but only when the policy instrument is successful in smoothing the growth rate of human capital.

The impact of agglomeration effects and accessibility on wages

This paper contributes to the empirical literature on the effects of agglomeration and road accessibility on productivity of firms by looking at the case of Spain. We approach productivity indirectly by using individual wages allocated at the NUTS III level. We use a repeated cross-section of individual micro-data for the years 1995, 2002 and 2006. The availability of interprovincial travel time data for each of the three years allows controlling for transport improvements over the period by using a market potential variable. Additionally, agglomeration is approached by employment density and we control for localization economies, human capital externalities and a large set of individual and workplace characteristics. Estimating by instrumental variables, our results show a positive and significant effect of market accessibility on wages and non linear effect for employment density.

Social Security in Theory and Practice (II): Efficiency Theories, Narrative Theories, and Implications for Reform

166 countries have some kind of public old age pension. What economic forces create and sustain old age Social Security as a public program? Mulligan and Sala-i-Martin (1999b) document several of the internationally and historically common features of social security programs, and explore "political" theories of Social Security. This paper discusses the "efficiency theories", which view creation of the SS program as a full of partial solution to some market failure. Efficiency explanations of social security include the "SS as welfare for the elderly" the "retirement increases productivity to optimally manage human capital externalities", "optimal retirement insurance", the "prodigal father problem", the "misguided Keynesian", the "optimal longevity insurance", the "government economizing transaction costs", and the "return on human capital investment". We also analyze four "narrative" theories of social security: the "chain letter theory", the "lump of labor theory", the "monopoly capitalism theory", and the "Sub-but-Nearly-Optimal policy response to private pensions theory". The political and efficiency explanations are compared with the international and historical facts and used to derive implications for replacing the typical pay-as-you-go system with a forced savings plan. Most of the explanations suggest that forced savings does not increase welfare, and may decrease it.

Social security in theory and practice (II): Efficiency theories, narrative theories and implications for reform

166 countries have some kind of public old age pension. What economic forcescreate and sustain old age Social Security as a public program? Mulligan and Sala-i-Martin (1999b) document several of the internationally and historically common features of social security programs, and explore "political" theories of Social Security. This paper discusses the "efficiency theories", which view creation of the SS program as a full of partial solution to some market failure. Efficiency explanations of social security include the "SS as welfare for the elderly" the "retirement increases productivity to optimally manage human capital externalities", "optimal retirement insurance", the "prodigal father problem", the "misguided Keynesian", the "optimal longevity insurance", the "governmenteconomizing transaction costs", and the "return on human capital investment". We also analyze four "narrative" theories of social security: the "chain letter theory", the "lump of labor theory", the "monopoly capitalism theory", and the "Sub-but-Nearly-Optimal policy response to private pensions theory".The political and efficiency explanations are compared with the international and historical facts and used to derive implications for replacing the typical pay-as-you-go system with a forced savings plan. Most of the explanations suggest that forced savings does not increase welfare, and may decrease it.

Capital intangível e direitos de propriedade intelectual : uma análise institucionalista

This paper deals with the main evolutions that explain the emergence of new institutional arrangements that characterize the post-fordism. (i) Hence, I will show that the property rights modifications bring forth new forms of competition;(ii) Also, I will make explicit the concrete expressions of this new competition, as well as how it translates itself in a sub-optimum allocation in the framework of the market game; (iii) I will study the modifications of externalities nature produced by technical progress; (iv) Finally, I will analyze the macroeconomic implications in regard to growth mechanisms and to capital nature.