How Large are Learning Externalities? Measurement by Calibration

Quantitative features on human capital externalities are not fully understood. This paper measures the social returns on human capital that arise from learning externalities, through the calibration of a growth model. The calibration uses an equilibrium condition that equates private returns on physical capital and on human capital. Results suggest that learning externalities contribute substantially to human capital production. In a benchmark model, the social value of human capital is about 37% higher than the private value. The social rate of return on human capital is 2 to 4% points higher than the private rate of return, 8%.