Local Human Capital Externalities and Wages at theFirm Level: The Case of Italian Manufacturing

We use a unique firm-level data set merging administrative information on average wagespaid by firms by skill level (blue collars and white collars), Population Census information onthe local stock of human capital available to firms and survey information on firmcharacteristics to investigate the existence and magnitude of local human capital externalitiesin Italian Manufacturing. The latter represents an interesting case study due to theprevalence of small family business and a technological lag with respect to the US, to whichmost evidence supporting local human capital spillovers refers. Our estimates show that inItaly, like in the US, firms located in geographical areas with a higher stock of human capitalpay higher wages. This evidence is robust to many variants of the econometric specificationand to addressing potential endogeneity issues using instrumental variables estimation andinstruments based on the lagged expansion of the Italian higher education system and thelagged demographic structure....