Human capital convergence in European NUTS 2 regions

Abstract

Research background: The role of human capital in modern economy development is as important as that of material growth factors. According to the three-sector model theory, economic growth is associated with the process of labour force leaving the primary sector. The research issue addressed in this paper was the human capital level estimation in European NUTS 2 regions and the relationship between the human capital level and sectoral structure of the economy. Purpose of the article: The article aimed to verify the hypotheses of absolute and conditional human capital convergence in European NUTS 2 regions. The analysis covered the 2005-2020 period for European NUTS 2 regions and two subgroups: the CEE regions and the Western European regions. Methods: A composite indicator approach was adopted to measure human capital levels in NUTS 2 regions. In order to verify the absolute and conditional b-convergence hypotheses, dynamic panel data models were estimated. The Blundell and Bond system-GMM estimator with parameter standard errors robust to heteroscedasticity was used. Findings & value added: The study positively verified the hypotheses of absolute and conditional convergence in each group of regions. Percentages of employees in sectors proved to be the steady-state determinants. The time needed to reduce differences occurring in human capital levels by half (a half-life) was about 11 times greater for the CEE regions than for the Western European ones. The value added of the article lies in proving the relationship between the sectoral structure of employees and the pace of human capital convergence in European NUTS 2 regions.