Reports
Discussion Papers
No.672 Human Capital Externalities in Indonesian Cities
July 2017
ABSTRACT
Using Indonesian plant-level manufacturing data for 1996 and 2006, this study estimates the external benefits of human capital investment. The external benefits are identified from the relationship between plant-level wages and city-level human capital stock, after controlling for workers’ skill levels, plant fixed effects, and time-varying industry fixed effects. Our results suggest that the degree of human capital externalities depends on the size of the urban population, and that such externalities do not occur in cities that either too large or too small. In the case of the Indonesian manufacturing industry, evidence of human capital externalities is observed in cities with a population of between 500 thousand and 1,500 thousand.
Keywords: Human capital externalities, urban areas, plant-level data, Indonesia
JEL classification: E24, J24, J30, L60, O40
PDF available at http://hdl.handle.net/2344/00049238
Please note that discussion papers are works in various stages of progress and most have not been edited and proofread and may contain errors of fact or judgment. Revised versions of these papers may subsequently appear in more formal publication series. The views expressed in this publication are those of the author(s). The IDE does not guarantee the accuracy of the data included and accepts no responsibility for any consequences arising from its use.