Human capital, technology intensity and growth in a regional context

This paper contributes to the vast literature on the regional application of endogenous growth theory. A well-known feature of capitalist growth and development is the vast and persistent divergence in per capita income growth between regions. These differences have been explained theoretically and empirically using neoclassical approaches emphasising increasing returns at a regional level, with reference, for example, to the development of industrial districts. The new economics of urban and regional growth look at the ‘local’ dimension focussing on the role of the so-called knowledge economy as an explanation for uneven development across regions. Within this heterogeneity, the operation of human capital and knowledge spillovers play roles in differentiating growth rates. The study of the concentration of a specific mix of economic activities and human capital, with a ‘fine grain’ focus at the local level, is a useful tool to understand growth and spatial differentials. In this study, we develop an empirical analysis of the pattern of growth in the Veneto region, focusing mainly on the role played by human capital employed in sectors with different technological intensities. To do so, we built up an original dataset by merging data available at a very local level (Local Labour Systems-LLS), which was produced by the National Institute of Statistics, with our elaborations on data from an employee-employer dataset made available by the Local Labour Agency (Veneto Lavoro). The latter dataset included all employment spells in the Veneto region. Our new dataset allows both definition of the human capital content of every worker and classification of firms according to their technological intensity. This dataset is used to estimate growth equations for the cross-section of the Venetian LLSs and to test the validity of different growth models. The results underline how growth in the Veneto region is positively affected by human capital employed not in high to medium-high technology industries, but in medium to medium-low ones.