External effects of investment in human capital

Abstract

With the recent renewed interest in economic growth literature, education stands at the frontier of contributions to national economic advancement. The New Growth Theories assert the importance of human capital for the enhancement of the economic well-being of a country. The external effects associated with education in the Lucas' model (1988) form the starting point for investigating the impact of human capital on wages. The objective of this study is to empirically test Lucas' basic assumption of spillover effects of human capital using a microeconomic approach (see Winter-Ebmer 1992).