Investing in human capital in the era of European Universities: A comparative analysis of skill mismatches across the regions of the ERUA countries

Abstract

Investment in human capital in the form of education and its returns for workers in terms of better-quality jobs remains a contested issue in the literature. While some postulate that such an investment leads to marginal productivity increments, others refute this hypothesis arguing that it overlooks crucial political economic factors. To contribute to ongoing debates, this paper provides a comparative analysis at the regional level, covering the period between 2009 and 2021 and 5 EU countries (Greece, Bulgaria, France, Germany, and Denmark), putting particular emphasis on the regions that are associated with the countries of the European Reform University Alliance (ERUA). Specifically, the analysis calculates highly educated individuals employed in low-, medium-, and high-skill occupations, and then identifies the relative regional concentrations of each (mis)match using the Location Quotient Index. Findings highlight the uneven geography of skill mismatches, as robust and innovative economies tend to allocate their labour force across occupations more efficiently than peripheral regions. Discussing our key findings through the lens of Geographical Political Economy, we point to five interconnected determinants of human capital allocation: national economies’ dynamism, regional industrial specialisations, degree of urbanisation, local institutional capacity, and demographics. Concluding, five sets of policy recommendations are proposed aligning with the EU New Skills Agenda and the European Universities Initiative.