This paper proposes a methodology to estimate externalities in human capital as a response to the evidence of a worldwide divergent development. We estimate supply and demand for human capital in a five-year panel for 60 countries in the period 1980-2000 and found that there are positive externalities in human capital accumulation close to one, implying increasing returns to scale and increasing marginal returns in human capital which eliminates the channel that enables generating conditional convergence.
