External Effects of Education: Human Capital Spillovers in Regions and Firms
Using a matched employer-employee panel dataset for Germany, we analyze the external effects of education on individual wages. Following the basic framework of Moretti (2004), we allow spillover effects to occur both within a specific fi rm and a specific region rather than analyzing spillover effects only on a regional level. Con-trolling for individual- and fi rm-specific fixed effects and using an instrumental variable strategy, our results confirm the existence of positive but small external effects of human capital. Positive spillover effects within fi rms occur only for the group of high-skilled workers.