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12:30 - 13:45 9 December 2015

Estimating Aggregate Human Capital Externalities


IFS Basement | Institute for Fiscal Studies (link Map)
7 Ridgmount Street | London | WC1E 7AE | United Kingdom

Open to: Academic | Student
Ticketing: Open

Speaker information

Ananth Seshadri, University of Wisconsin-Madison

Using measures of Compulsory Schooling Laws as instruments for state average schooling, we find that one more year of average schooling leads to a 6-8% increase in individual wages. The effect is statistically significant and robust to different specifications. We also find the effect to be larger for less-educated workers. The key difference from previous strategies is that, the exogenous variation in average schooling induced by our instruments comes mainly from workers not used directly in the wage regression. We construct a model of human capital accumulation where the average human capital of an economy is allowed to affect the productivity of a typical firm in the economy. The calibration of the model suggests that the elasticity of a firm’s productivity with respect to the average human capital of the economy is about 0.12.


Institute for Fiscal Studies
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