The Social Value of Education and Human Capital

Fabian Lange and Robert Topel

Chapter 08 in Handbook of the Economics of Education, 2006, vol. 1, pp 459-509 from Elsevier

Abstract: We review and extend the empirical literature that seeks evidence of a wedge between the private and social returns to human capital, specifically education. This literature has two main strands. First, much of modern growth theory puts human capital at center-stage, building on older notions of human capital externalities as an engine of economic growth. Empirical support for these ideas, based on both the comparative growth of national outputs and on the geographic dispersion of wages within countries, is meager. There is a strong association between average earnings and average education across nations and regions in the U.S. that exceeds the private returns to education. However, problems of omitted variables and endogeneity inherent in spatial equilibrium models mean that this association can hardly be understood as evidence for social returns. There is no evidence from this literature that social returns are smaller than private ones, yet neither is there much to suggest that they are larger. We then turn to the literature on job market signaling, which implies that social returns to education are smaller than private returns. Consistent with our earlier conclusions, we find scant evidence of this. We construct a model of the speed of employer learning about workers' unobserved talents, and we estimate the model using panel data on young workers. We find that employer learning about productivity occurs fairly quickly after labor market entry, implying that the signaling effects of schooling are small.

Keywords: education externality; spacial equilibrium; migration; skill biased productivity growth (search for similar items in EconPapers)
JEL-codes: I2 (search for similar items in EconPapers)
Date: 2006
ISBN: 978-0-444-51399-1
References: Add references at CitEc
Citations: View citations in EconPapers (101)

Downloads: (external link)
http://www.sciencedirect.com/science/article/B7P5H ... b4a48342febda3e3b8d4
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:educhp:1-08

Access Statistics for this chapter

More chapters in Handbook of the Economics of Education from Elsevier
Bibliographic data for series maintained by Catherine Liu ().