published in: Journal of Population Economics, 2010, 23(2), 539-558
Do workers benefit from the education of their co-workers? This question is examined first by
introducing a model of on-the-job schooling, which argues that educated workers may
transfer part of their general skills to uneducated workers and that this spillover is affected by
the degrees of non-excludability, irreversibility and generality of those skills. We then conduct
an empirical analysis drawing on a matched panel of Portuguese firms and their workers.
Schooling endogeneity is tackled by considering firm fixed effects and instruments based on
schooling lags and the lagged share of retirement-age workers. We find evidence of large
firm-level social returns (ranging between 14% and 23% – and thus exceeding standard
estimates of private returns) and of significant returns accruing to less educated workers but
not to their more educated colleagues.
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