Individual earnings and educational externalities in the European Union

This paper examines whether differences in educational externalities affect individual earnings across regions in the European Union. Using microeconomic data from the European Community Household Panel, it resorts to spatial economic analysis in order to determine to what extent differences in individual earnings are the result of (1) the educational attainment of the individual, (2) the educational attainment of the other members of the household in which he/she lives, (3) the educational endowment of the region where the individual lives, or (4) the educational endowment of the neighbouring regions. The results highlight that, in addition to the expected positive returns of personal educational attainment, place-based regional and supra-regional educational externalities generate significant pecuniary benefits for workers. These findings are robust to the inclusion of different individual, household, and regional control variables.