18 Q1 2008
the dense concentration of employeeswho work in the same industry. In thesecond case, the diversity of industriesallows ideas developed in one industryto be more widely disseminated toother industries, where the new ideas,perhaps with some modifications, canalso be productively applied. In bothcases, exchanges of information aboutproductivity-enhancing possibilitiesare more likely in areas with greaterpopulation size, density, and industrialvariety.Innovation, spillovers, and im-proved productivity are more likely inmetropolitan areas with large con-centrations of workers with highereducation. Empirical research supportsthis insight, demonstrating that earn-ings, which are based on productivity,are greater in metropolitan areas thathave greater concentrations of collegegraduates. Research by Enrico Morettiestimates that a one-percentage-pointincrease in the supply of college gradu-ates in a metropolitan area raises wagesfor workers in that area: 1.9 percent forhigh school dropouts, 1.6 percent forhigh school graduates, and 0.4 percentfor college graduates.
Furthermore,research by Edward Glaeser and DavidMaré finds that growth in earnings ap-pears to be more rapid in urban areas;an initial wage increase of about 7percent when workers first move fromrural to urban areas rises to an urban-rural difference of about 10 percent inthree to five years.By making workers more produc-tive, education enables faster earningsgrowth for the educated individual.Additionally, various research studies
The increase in wages for college graduatesis the net effect of two offsetting factors:spillovers, which raise wages, and the increasein supply of college graduates, which tends toreduce wages. The small positive net resultindicates that the spillover effect slightlyovercomes the supply effect.
have revealed that areas with concen-trations of educated residents are morelikely to have faster growth in popula-tion, employment, and productivitythan areas where college-educated resi-dents are less concentrated.
Of course,college graduates are likely to relocateto obtain employment early in their ca-reers; therefore, rapidly growing areasare likely to attract them. Thus, thereis a certain counterbalance betweeninfluences: Concentrations of col-lege graduates influence growth, andgrowth influences the concentration of college graduates. I discuss this in moredetail later when I talk about local areaefforts to increase the college-educatedshares of their populations.
RAISING THE LEVEL OF EDUCATIONAL ATTAINMENTIN A REGION
As we have seen, college educa-tion is beneficial to the individualwho possesses it. It also has spilloverbenefits for co-workers and residentsof a region where large numbers of college graduates work and live. Whatare some of the factors that affect theeducational attainment of an area’spopulation? At first glance, it wouldseem that an area that produces a largenumber of college graduates wouldhave a greater percentage of popula-tion with bachelor’s degrees or higher.The production of college gradu-ates is notably evident in the Pennsyl-vania-New Jersey-Delaware region. Alarge number of colleges and universi-ties produce large numbers of collegegraduates, although there is variationamong the three states. Pennsylvaniaranks high among all states in the U.S.in the number of colleges and univer-sities and in the number of degreesawarded, both absolutely and whenadjusted for total state population.New Jersey ranks somewhat aboveaverage on both measures absolutely,but below average when adjusted fortotal state population. Delaware ranksbelow average on both measures abso-lutely; however, when the measures areadjusted for total state population, thepercentage moves above average in thenumber of degrees awarded but not inthe number of institutions. (See Tables2 and 3 for state data and rankings.)Pennsylvania and Delaware“produce” more college graduates thanthey “consume,” and New Jersey “pro-duces” fewer graduates. That is, thetotal number of freshmen enrolled inPennsylvania and Delaware is greaterthan the number of college freshmenamong those states’ population. (Penn-sylvania and Delaware bring in somestudents from out of state.) The totalnumber of freshmen enrolled in New Jersey is lower than the number of col-
See the articles by Curtis Simon and ClarkNardinelli; Edward Glaeser, Jose Scheinkman,and Andrei Schleifer; James Rauch; andChristopher Wheeler.
Pennsylvania ranks high among all statesin the U.S. in the number of colleges anduniversities and in the number of degreesawarded, both absolutely and when adjustedfor total state population.