A re-examination of the social returns to education: Evidence from U.S. cities

This paper re-examines the impact of city educational composition on wages, often interpreted as human capital externalities. Using U.S. Census data, I find large, positive spillovers from college education in the 1980s, as documented by Moretti (2004a). In contrast, in the 1990s, the supply of skilled workers has no impact on average wages and may even negatively impact the wages of low-skill workers. These findings invite reinterpretation of previous studies on social returns to education, as shifts in the impact of city education composition on wages are not consistent with standard models of technological human capital externalities.