Human Capital in the City: Exploring the Relationship Between Skill and Productivity in US Metropolitan Areas

In economics, new growth theory suggests that knowledge creation and innovation are key drivers of growth. As a result, the ‘new economy’ is increasingly reliant upon the knowledge, skills, and abilities embodied in its workforce, also known as human capital, that facilitate the stimulation and generation of new ideas (Romer 1986, 1990 and Lucas 1988). This research contributes to the understanding of the relationship between stocks of human capital and economic output. I construct metrics to measure concentrations of basic worker skills using the Bureau of Labor Statistics Occupational Information Network (O*NET) and employment estimates for 353 US metropolitan areas. In general, I find that basic skills are positively correlated with higher productivity. Specifically, I find that higher levels of the skills math and critical thinking partially explain higher levels of regional productivity. Science, though not statistically significant, has a negative correlation between higher levels of skill and regional output.