Cross-State Variation in the Production and Use of College-Educated Labor John Bound University of Michigan and NBER

The main question addressed in this analysis is how the production of undergraduate and graduate education at the state level affects the local stock of university-educated workers. The potential mobility of highly-skilled workers implies that the number of college students graduating in an area need not affect the number of college graduates living in the area. However, if the production of relatively large numbers of university graduates by colleges and universities also affects the industrial composition in an area, then there may be an association between the production and use of university-trained manpower. The size of the association between the flow of educational production and the stock of skilled workers provides one indicator of the magnitude of the externalities provided by the higher education industry. We find that the strength of the link between individual location choice and the state of degree receipt varies with field of study and the level of degree. Overall, there is a moderate link between the production and use of BA degree recipients; states awarding relatively large numbers of BA degrees in each cohort also have higher concentrations of college-educated workers. For medical doctors, the long-term link between production and stock is much weaker. Explanations for variations in the relationship by field and degree level reflect differences in the nature of demand in the labor market and production technologies in the education market.