  This paper highlights the potential for negative dynamic consequences of
recent trends towards the formation of "skill-hubs". I first show evidence that
skill acquisition is biased towards skills which are in demand in local labor
markets. This fact along with large heterogeneity in outcomes by major and
recent reductions in migration rates implies a significant potential for
inefficient skill upgrading over time. To evaluate the impact of local bias in
education in the context of standard models which focus on agglomeration
effects, I develop a structural spatial model which includes educational
investment. The model focuses on two sources of externalities: productivity
through agglomeration and signaling. Both of these affect educational decisions
tilting the balance of aggregate skill composition. Signaling externalities can
provide a substantial wedge in the response to changes in skill demand and
skill concentration with the potential for substantial welfare gains from a
more equal distribution of skills.
