Local human capital externalities and wages at the firm level

What is it about?

Highly educated workers may increase a firm's productivity. This could happen not only because they are more productive in the first place, but also because they improve the productivity of less-educated workers inside the firm (positive externalities).

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Photo by Andreas Klassen on Unsplash

Photo by Andreas Klassen on Unsplash

Why is it important?

We investigate these effects for the case of Italian manufacturing firms and assess whether firms employing highly educated workers also pay on average higher wages to both high and low educated workers, which in turn should reflect higher productivity. We address the potential problem that firms hiring highly educated workers may also ex-ante be more productive (selection) by leveraging changes in the geographical distribution of universities induced by higher education expansion policies. This is important because we indirectly show that higher education expansion may have significant positive spillover effects on firm productivity.