Estimated human capital externalities in an endogenous growth framework
CESifo, Munich, 2019
CESifo Working Paper No. 7603
![](https://cesifo.org/DocImg/cesifo1_wp7603.jpg?c=1689237206)
To better understand the quantitative implications of human capital externalities at the aggregate level, we estimate a two-sector endogenous growth model with knowledge spill-overs. To achieve this, we account for trend growth in a model consistent fashion and employ a Markov-chain Monte-Carlo (MCMC) algorithm to estimate the model's posterior parameter distributions. Using U.S. quarterly data from 1964-2017, we find significant positive externalities to aggregate human capital. Our analysis further shows that eliminating this market failure leads to sizeable increases in education-time, endogenous growth and aggregate welfare.
Fiscal Policy, Macroeconomics and Growth
Economics of Education