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Human Capital Externalities and Urban Wage: A Hierarchical Linear Model

Sungchul Cho 1 Up Lim 1

1연세대학교

Accredited

ABSTRACT

This study proposes a multilevel model to examine the effect of labor market human capital characteristics on individual productivity. Our aim is to add a new perspective to conventional model by analyzing interactive effects between individual characteristics and regional characteristics on wage level. This analysis is based on a hierarchical linear model to examine labor market human capital externalities, containing both individual level and regional level (occupational or labor market level) to explain wage inequality. This model is useful to decompose individual level effect and contextual group level effect. By employing a multilevel model, this study can help us to understand wage differentials more systematically. We examined whether the urban wage levels vary with the nature of local knowledge environment. If the workers' activities are subject to knowledge spillovers, workers could be more productive in a region which has an abundant human capital base. We found higher levels of average human capital in labor market level resulted in relatively higher compensation of individual workers.

Citation status

* References for papers published after 2022 are currently being built.

This paper was written with support from the National Research Foundation of Korea.