Human Capital Externalities: Effects for Low-Educated Workers and Low-Skilled Jobs

Investments in human capital are essential themes in many policy programmes. Besides the direct private returns of education, there is evidence of positive human capital externalities at the level of regions and firms. The results in this paper show that both production and consumption externalities have positive effects on wages. Production externalities are transmitted at the level of firms and not at the regional level. For workers in low-skilled jobs, consumption externalities dominate production externalities. Workers on low-skilled jobs earn higher wages when working in cooperation with workers in high-skilled jobs, while for low-educated workers such cooperation with high-educated workers is negative.