Estimating the Skill Bias in Agglomeration Externalities and Social Returns to Education: Evidence from Dutch Matched Worker-Firm Micro-Data

Tinbergen Institute Discussion Paper 14-088/VIII

29 Pages Posted: 13 Jul 2014

See all articles by Stefan P. T. Groot

Stefan P. T. Groot

VU University Amsterdam

Henri L. F. de Groot

Vrije Universiteit Amsterdam; Tinbergen Institute

Date Written: July 8, 2014

Abstract

This paper employs a unique set of micro-data covering almost one third of the Dutch labor force, to estimate the relationship between agglomeration externalities and the level of education. While the positive relationship between economic density and productivity and wages has long been established in the economic literature, less is known about the effects of density on the productivity of different types of workers. This paper shows that there is substantial heterogeneity in the relationship between density and productivity for workers with different types of education. Apart from estimating the impact of aggregate density, we also estimate whether the composition of the local labor market in terms of education is related to the productivity of different types of workers. Using the presence of universities as an instrument, we estimate the effect of the supply of university graduates on wages, i.e. the social return to education.

Keywords: agglomeration, education, knowledge-spillovers, wages, local labor markets

JEL Classification: J03, I02

Suggested Citation

Groot, Stefan P. T. and de Groot, Henri L.F., Estimating the Skill Bias in Agglomeration Externalities and Social Returns to Education: Evidence from Dutch Matched Worker-Firm Micro-Data (July 8, 2014). Tinbergen Institute Discussion Paper 14-088/VIII, Available at SSRN: https://ssrn.com/abstract=2464995 or http://dx.doi.org/10.2139/ssrn.2464995

Stefan P. T. Groot (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

Henri L.F. De Groot

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands
0640494981 (Phone)
2135 DL (Fax)

Tinbergen Institute

Gustav Mahlerplein 17
Amsterdam, 1082 MS
Netherlands

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