Using panel data constructed from 160 cities and counties in Korea, this study examines the effects of the college-graduated population on regional labor productivity. In the theoretical model, the population ratio of college graduates can enhance productivity not only directly through the conventional human capital effect but also through the matching effect in the labor market and knowledge spillovers, which are external to individual firms. We estimate two econometric models, an interactive model and a regime change model, and the results are consistent with the prediction of the theoretical model. An analysis of the quantitative importance of the matching/spillover effects indicates that these effects are concentrated in a small number of big cities. The current results imply that regional gaps in productivity and income may persist, or even worsen, in the absence of policy intervention.