May 2008

IZA DP No. 3493: Human Capital Externalities and the Urban Wage Premium: Two Literatures and their Interrelations

published in: Urban Studies, 2010, 47 (4), 749-767

In this paper we survey the recent developments in two empirical literatures at the crossroads of labor and urban economics: Studies about localized human capital externalities (HCE) and about the urban wage premium (UWP). After surveying the methods and main results of each of these two literatures separately, we highlight several interrelations between them. In particular we ask if HCE can be interpreted as one fundamental cause of the UWP, and we discuss if one literature can conceptually learn from the methods that are used by the other one.