Endogenous Growth, Human Capital, and Industry Wages

Rudolf Winter-Ebmer

No 714, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Lucas' 1988 model of the external effects of human capital formation is used as a starting point for an analysis of the impact of human capital on wages. Most empirical tests of new growth theory are based on time-series and cross-section data. This paper suggests a microeconometric approach to test Lucas' basic assumption of external effects of human capital. First, the internal effects of education are filtered out using wage functions for individuals. Second, the resulting industry wage premiums are regressed on industry-specific characteristics and, above all, on average human capital in the industry, to account for the external effects of human capital. The hypothesis is corroborated for Austria data. Finally, alternative hypotheses such as self-selection or varying individual human capital productivity in different sectors are examined.

Keywords: Endogenous Growth; External Effects; Human Capital; Industry Wage Differentials (search for similar items in EconPapers)
JEL-codes: J24 J31 O40 (search for similar items in EconPapers)
Date: 1992-09
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Citations: View citations in EconPapers (7)

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Journal Article: Endogenous Growth, Human Capital, and Industry Wages (1994)
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