Determinants of Human Capital : A study on Swedish municipalities

Abstract: It is widely accepted that human capital plays a positive role in a country’s and region’s economic growth and productivity. In recent times, regions are in need of new ways to keep their competitive advantage when faced with modern day challenges such as globalization or technological advances. People and their skills represent valuable assets for their region and can help provide the edge it necessitates to improve its performance or even outperform others. It is, thus, essential to try and understand what determines the accumulation of human capital in a region in order to help improve the existing stock. In a study on Swedish municipalities, we analyse the importance of several determinants of human capital accumulation. For this reason we created a human capital index, based on education, creativity and health. This allows us to capture broader aspects of effective workforce. We used cross-sectional regressions, which resulted in a very interesting outcome. The determinant with the biggest impact turned out to be cultural diversity, followed by specialization in knowledge-based manufacturing.