The importance of knowledge creation and innovation for productivity increases and economic development has been widely studied in the economic literature. More educated workers and scientists, usually agglomerated in metro areas, are responsible for fostering innovation, the transfer of ideas, and for the creation of knowledge spillovers that benefit their local economy and the nation as a whole. Less attention has received, however, the effects of this concentration of human capital on other aspects such as inequality, and especially on the wage gap differential between high and low-educated workers. Additionally, only a few academic publications have tried to identify and characterized the sources of knowledge creation and addressed the effects of immigration on this production and dissemination of knowledge. The first two chapters of this dissertation attempt to contribute to this literature, by separately estimating the effects of the concentration of human capital and its externalities on the wage gap, and by assessing the effects of immigration on knowledge creation and dissemination.
The first chapter studies the impacts of the positive externalities created by the concentration of human capital on wages for different groups of workers and on the wage gap between low and high-educated workers in US metro areas. Using data from the American Community Survey for 2005, 2010, and 2014, the results suggests a positive association between the share of high-educated workers and wages for all workers, but contrary to some of the previous literature, larger gains for medium and high-educated workers. Taken together, these results suggest that human capital externalities associated with the concentration of high-educated workers lead to increases in the wage gap between them and low-educated workers. Results are robust to several specification changes, including the modification of the definition of high-educated workers, and different instrumental-variable approaches.
The second chapter of this dissertation quantifies and compares the productivity of domestic and foreign-born researchers in the US, in an attempt to identify the contribution of immigration to the creation and dissemination of knowledge. This study uses individual data from the restricted-access version of the Survey of Doctoral Recipients between 1995 and 2003 to compare knowledge production, in terms of papers presented, articles published, patent applications, and patents granted, of foreign-born and domestic PhD recipients. Consistent with previous literature, results of this study strongly support the notion that foreign-born researchers, and especially naturalized U.S. citizens, outperform their domestic counterparts in all four of our measures of knowledge production. This research shows that while aspects associated with academic training, quality of the school, occupation mismatch, and fields of study, among others, play a role in productivity differentials, they only account for a small proportion of the variability. In this endeavor, this investigation develops a theoretical a model to show that non-directly observable aspects associated with non-academic ability of foreign-born and a better match between the student and the PhD program, associated with differing opportunity costs of attending the program, may explain the results. Different specifications and robustness checks are conducted to provide support to the presented theory.
Finally, the third essay of this dissertation diverts from the first two chapters and focuses on the housing market and on the effect of natural amenities on cross-county differentials in rents and housing values. The third essay builds on the commonly used approach to measure housing user costs as a national average of quality-adjusted prices. Since large spatial differentials in housing rental and costs are not captured by this measure, and more importantly for this study, since rental markets generally reflect current supply and demand processes, while housing costs also reflect a long-term expectation of future housing prices—i.e., forward-looking markets capitalize long-term expectations of the city’s future housing prices, this commonly used measure could introduce important biases. All else equal, housing prices will be higher in the most desirable or “nice” places, and while this is also true for rents, the difference between housing values and rents increase with the area’s amenities stock. This suggest that hedonic estimates of place-specific attributes, such as environmental elements or amenities, would be misleading.
In particular, this third essay uses household data to first compute a quality-adjusted measure of rents and housing values across the US, and secondly, attempts to empirically estimate the characteristics associated with differential quality-adjusted rent/housing-value ratios, with a focus on differences arising from the stock of natural amenities. Consistent with the hypothesis, the results show that high natural amenity areas have rent-over-value ratios that are significantly smaller than low amenity places, and that differential is mostly explained by differences in values rather than rents. Spatial variation in natural amenities, especially those related to hours of sun, temperature, humidity, topography, and the presence of water bodies are highly correlated with cross-county variation in rent/value ratios. The effects are persistent across metro and nonmetro counties.