Estimating Aggregate Human Capital Externalities"

Junjie Guo, Nicolas Roys and Ananth Seshadri
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Junjie Guo: University of Wisconsin-Madison

Review of Economic Dynamics, 2026, vol. 62

Abstract: This paper estimates two measures of human capital externalities. By incorporating externalities into an overlapping-generations model of human capital accumulation with Compulsory Schooling Laws (CSL), we show that human capital externalities can be estimated from the effects of CSL for one generation on wages of other generations. Using an instrumental-variable strategy deduced from the model, we find one more year of average schooling at the U.S. state level raises individual wages by 6-8%. Taking this reduced-form estimate into account, we find the elasticity of a typical firm’s productivity with respect to the average human capital of an economy is 0.121. (Copyright: Elsevier)

Keywords: Education; Externalities; Human capital; Wages (search for similar items in EconPapers)
JEL-codes: E24 J24 J31 O47 (search for similar items in EconPapers)
Date: 2026
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Working Paper: Estimating Aggregate Human Capital Externalities (2024)
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DOI: 10.1016/j.red.2026.101363

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