Identifying Human Capital Externality: Evidence from China

Identifying Human Capital Externality: Evidence from China

Blog Article

Abstract:: Using data from two well-known individual surveys in China, we estimate human capital externality.We find a positive and statistically significant Makeup effect of city-level human capital on individual earnings.Fixed-effects estimates show a one-year increase in city average education could increase individual earnings between 7.3% and 8.9%.

Our IV estimate indicates a 7.6% increase.This finding confirms a long-held belief by economists that there are external benefits of education that are not captured by the individuals who invested in human capital.By extension WASH BRUSH our finding also offers a justification for an active role of the government in promoting education.We also find that the estimated effect of human capital externality is larger in coastal cities than in non-coastal cities and is larger in the non-state sector than in the state sector.

We ascribe these heterogeneities to differences in institutional and technological environments across cities and sectors.Keywords:: Human capital externality, Individual earnings, Chinese cities, JEL Codes:: I28, D62, D83.