http://www.economics.harvard.edu ... ons_nber_062011.pdf
Human Capital and Regional Development
Abstract
We investigate the determinants of regional development using a newly constructed database of
1569 sub-national regions from 110 countries covering 74 percent of the world’s surface and 96
percent of its GDP. We combine the cross-regional analysis of geographic, institutional, cultural,
and human capital determinants of regional development with an examination of productivity in
several thousand establishments located in these regions. To organize the discussion, we present a
new model of regional development that introduces into a standard migration framework elements
of both the Lucas (1978) model of the allocation of talent between entrepreneurship and work, and
the Lucas (1988) model of human capital externalities. The evidence points to the paramount
importance of human capital in accounting for regional differences in development, but also
suggests from model estimation and calibration that entrepreneurial inputs and human capital
externalities are essential for understanding the data.