Local human capital and productivity: an analysis for the Spanish regions

In the last decade, different studies have empirically tested the existence or not of a positive relationship between local human capital stock and regional productivity. The most usual finding has been a positive correlation among them. However, different authors do not agree when explaining this result. On one hand, a first group of authors argue that this relationship is related to the presence of external economies associated to human capital. On the other hand, a second group believe that the reason to find this positive relationship is the complementarity between human and physical capital. The objective of this paper is to analyse the possible existence of a positive relationship between the human capital stock of the Spanish provinces (NUTS III regions) and their productivity and, next, to test if this relationship can be explained by the presence of external economies. This is done using data from the Family Budget Survey (EPF) on individual wages, education and experience for the 50 considered Spanish provinces.