Full Citation

Title: Human Capital Externalities or Consumption Spillovers? The Effect of High-Skill Human Capital across Low-Skill Labor Markets

Citation Type: Working Paper

Publication Year: 2019

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ISSN: 1556-5068

DOI: 10.2139/ssrn.3335809

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Abstract: Previous studies often interpret the positive impact of high-skill human capital on the mean wages of low-skill workers as evidence of human capital externalities. We uncover a distributional wage effect that is difficult to reconcile with standard models of human capital externalities: city-level share of college graduates has a positive impact on wages of low-skill workers at the lower quantiles of the wage distribution, but not the upper quantiles. We then provide a comprehensive assessment and discussion of the effect of high-skill human capital on wages of low-skill workers in different occupations. We find a large and positive effect in the service sector but not in the manufacturing sector. These findings invite reinterpretation of previous studies on human capital externalities in low-skill labor markets, as the positive effect in the service sector is more likely to be explained by consumption spillovers generated by college-educated workers.

Url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3335809

Url: https://www.ssrn.com/abstract=3335809

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Authors: Liu, Shimeng; Yang, Xi

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Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

Countries: United States