Human Capital and Spatial Heterogeneity in the Iberian Countries' Regional Growth and Convergence

Human capital is believed to be an important conditioning factor in explaining the convergence and the speed of convergence of regional economies, although it is usually excluded from the estimated models due to a lack of consistent data. In contrast this paper, using a newly constructed series on human capital at the NUTS III level for Portugal, evaluates the role of human capital on the speed of convergence using a spatial econometric methodology, for a sample of Iberian NUTS III regions over the period 1991-2006. This is the first study to consider human capital effects at the NUTS III level and the results show convergence, both absolute and conditional, occurs mainly in the peripheral group of regions, while human capital plays a positive role only in the club of the richest regions, in contrast with an insignificant effect in the periphery. There is also evidence of important regional spillovers between the regions and evidence of the importance of EU regional policy in enhancing the convergence of the NUTS III regions.