Reverse educational spillovers at the firm level

Publication Date03 April 2017
AuthorUschi Backes-Gellner,Christian Rupietta,Simone N. Tuor Sartore
SubjectHR & organizational behaviour,Global HRM
Reverse educational spillovers
at the firm level
Uschi Backes-Gellner
Department of Business Administration, University of Zurich, Zurich, Switzerland
Christian Rupietta
Department of Business Administration, University of Zurich, Zurich, Switzerland and
Schumpeter School of Business and Economics, University of Wuppertal,
Wuppertal, Germany, and
Simone N. Tuor Sartore
Department of Business Administration, University of Zurich, Zurich, Switzerland
Purpose The purpose of this paper is to examine spillover effects across differently educated workers.
For the firsttime, the authors consider reversespillover effects,i.e. spillover effects from secondary-educated
workers with dual vocational education and training (VET) to tertiary-educated workers with academic
education. The authors a rgue that, due to structur al differences in train ing methodology and
content, secondary-educated workers with VET degrees have knowledge that tertiary academically educated
workers do not have.
Design/methodology/approach The authors use data from a large employer-employee data set: the
Swiss Earnings Structure Survey. The authors estimate ordinary least squares and fixed effects panel-data
models to identify such reversespillover effects. Moreover, the authors consider the endogenous
workforce composition.
Findings The authors find that tertiary-educated workers have higher productivity when working
together with secondary-educated workers with VET degrees. The instrumental variable estimations support
this finding. The functional form of the reverse spillover effect is inverted-U-shaped. This means that at first
the reverse spillover effect from an additional secondary-educated worker is positive but diminishing.
Research limitations/implications The results imply that firms need to combine different types of
workers because their different kinds of knowledge produce spillover effects and thereby lead to overall
higher productivity.
Originality/value The traditional view of spillover effects assumes that tertiary-educated workers create
spillover effects toward secondary-educated workers. However, the authors show that workers who differ in
their type of education (academic vs vocational) may also create reverse spillover effects.
Keywords Earnings, Education, Informational spillovers
Paper type Research paper
1. Introduction
Educational spillover effects have been of increasing interest to economists over the past
three decades. Studies focus on educational spillover effects at different aggregation levels
such as region (e.g. Ciccone and Peri, 2006; Moretti, 2004a; Rauch, 1993), industry (e.g. Kirby
and Riley, 2008; Sakellariou and Maysami, 2004), and firms or workers (e.g. Barth, 2002;
Battu et al., 2003; Bratti and Leombruni, 2009; Wirz, 2008). The common underlying
assumption in research on spillover effects is that spillovers flow downto lower-educated
workers from either the highest-educated individuals (e.g. Moretti, 2004b) or from the firms
average education level measured in number of years (e.g. Rauch, 1993). This assumption
neglects that educational spillovers can also arise from having different types of knowledge
regardless of the level or the length of education.
If individuals are heterogeneous in terms of the type of their education, we expect that
this will also cause educational spillovers due to complementary heterogeneous knowledge.
Evidence-based HRM: a Global
Forum for Empirical Scholarship
Vol. 5 No. 1, 2017
pp. 80-106
© Emerald PublishingLimited
DOI 10.1108/EBHRM-03-2015-0007
Received 31 March 2015
Revised 17 November 2015
2 February 2016
14 April 2016
Accepted 25 April 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
JEL Classification I20, J24, J30
In such cases, distinction only by educational level would not cover all relevant educational
dimensions. Especially in countries that have a vocational education and training (VET)
system offering high quality training at the secondary level such as Austria, Germany,
Switzerland, or Denmark, distinction by educational level might prove insufficient[1].
Therefore analyzing educational spillover effects not only by level but also by type of
education is important to catch the whole range of possible spillovers.
This paper contributes to the spillover literaturein two ways. First, we presenta new type
of spillover effects, which we call reverse spillovers.We discuss a conceptual background
that establishes differencesin knowledge as the underlyingmechanism for spillovers.Thereby
we define a new type of spillovers that goes in the opposite direction as the traditional
spillover.Traditionalspillovers go from highly educated workers to lower-educated workers
and assume thatlower-educated workershave no additional skills or knowledge that could be
relevantfor higher-educated workers(Moretti, 2004b).We define a new type of spillover thatis
distinctfrom the traditionalviewon spillovers: reversespillovers. Reverse spillovers occur if
a formallylower-educated workershas skills and knowledgethat is differentfrom but relevant
for a formally higher-educated worker. Thus, we assume that lower-educated workers can
have a different rather than a reduced skill set than higher-educated workers. We extend the
traditional view on spillover effects by arguing that not only the level of education
(i.e. secondaryvs tertiary education) but also theeducational type (i.e. academicvs vocational
education) causes differences in knowledge and thus spillover effects.
Second, we include predictions on the functional form of reverse spillovers in our
hypotheses. In line with Battu et al. (2003), we expect a non-linear relationship. They find a
positive but diminishing return from an increase in the overall educational level of a
workplace. We empirically analyze the spillovers to tertiary education from co-workers with
secondary vocational education like VET.
To test our hypotheses, we use data from the Swiss Earnings Structure Survey (ESS),
a large firm panel that also contains information on worker characteristics. We estimate
Mincer (1974) earnings equations[2]. The ESS is a very good match for our empirical
analysis, as the data set contains information on workerseducation and earnings and
allows us to measure education by using educational degrees instead of years of schooling.
In our estimation strategy we consider the potential endogeneity of a firms workforce
composition and use two instruments for the number of workers with VET degrees.
Since the traditionof training apprenticesis more widespread in the German-speakingregions
of Switzerland than in the non-German-speaking regions, we use a firmslocationasan
instrument for the employment of workers with VET degrees. Moreover, we use the number
of higher vocational diplomas awarded in each major region as a second instrument. Higher
vocational diplomas are tertiary degrees that instructors of apprentices often hold. Thus,
the number of higher vocational diplomas reflects the supply of instructors in VET.
Our results show that the effect from an increase in the number of workers with VET
degrees on the productivity of workers with tertiary education is positive but diminishing.
The effect is robust against the inclusion of regional, year, and sector controls, as well as
firm controls. Furthermore, the results remain robust with fixed-effects estimation.
The remainder of the paper is structured as follows. Section 2 presents the theoretical
considerations and derives our hypotheses. Section 3 explains our estimation strategy, and
Section 4 introduces the data set. Section 5 presents our empirical results and robustness
checks. Section 6 concludes.
2. Theory
2.1 Conceptual background
From a classical spillover perspective, educational spillovers occur when higher-educated
workers transfer their knowledge and skills to lower-educated workers and thereby increase

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