This chapter examines social interactions in human capital spillovers by focusing on spatial patterns in productivity, wages, and incomes, with particular emphasis on whether spatial concentration causes higher productivity. It begins with a discussion of aggregative spatial measures, such as economic activity at the level of states, regions, and counties in comparison with the smaller scale of cities and their neighborhoods. It then considers the interdependence between spatial interactions and spatial economic activity, the implications of spatial equilibrium for the urban wage premium, and human capital spillovers in microneighborhoods and in synthetic neighborhoods. It also shows how differences in patterns of productivity across locations and at different scales of spatial aggregation may be rationalized in terms of simple models of social interactions.
Human Capital Externalities and the Urban Wage Premium: Two Literatures and their Interrelations
