Analysis of the Human Capital Impacts on the Total Factor Productivity in the EU Regions By Means of the SDM Model

This study is devoted to explore the role and impact size of human capital for economic growth. We discern two levels of human capital impacts: First, we point to its contribution to knowledge capital production and second, the multiplicative effects of human capital in the aggregate production function are suggested. We employ lately developed methodology for spatial panel estimations with two-way fi xed effects. Our results show that throughout the EU NUTS-2 regions over the 2000s human capital spillovers, indeed, account for large total factor productivity variation. Moreover, our results suggest that local effects of human capital are secondary to these human capital spillovers in terms of magnitude and, what might be more compelling, that the multiplicative effects of human capital surmount its impacts attributable to knowledge production.

Keywords: total factor productivity, knowledge, human capital, human capital spillover, spatial panel, SDM