Diminishing social returns to education

Johan E. Eklund and Lars Petterson are contributing with a chapter in a forthcoming tribute to David Audretsch. In the article, the authors use Audretch’s research as a point of departure to examine the link between education, human capital spillovers and productivity in Swedish firms. They find an economically significant decline in the spillover effect over the 10 year period measured.

Human capital spillovers arise when the presence of individuals with high levels of human capital makes other workers more productive. If higher education is associated with human capital spillovers, a social return to education is generated. Eklund and Pettersson use firm-level production functions to estimate the social returns to higher education in Sweden.

According to the estimation, the spillover is positive at the beginning of the period 2001-2010 and gradually diminishes by the end of the period with no significant spillover effect. The authors interpret this as marginally diminishing social returns to education and the results have policy implications for higher education

The book is launched in conjunction with a reception for David Audretsch in Munich this November.