Human Capital Externalities: A Sectoral-Regional Application for Spain

Human capital externalities have been rejected recently in a number of papers, focused mainly on the US experience. However, these papers only contemplate the possibility of aggregate externalities within politically defined boundaries, states or cities. Given the nature of human capital externalities, their size and very existence should depend on the intensity of human interaction. Using microdata on Spanish workers, we have analyzed the existence of human capital externalities within each industry in each region and within establishments. The results show the existence of significant externalities, half of it outside the scope of individual firms, which in turn suggests the need of an active governmental role promoting schooling and human capital accumulation.