No. 105. THE ROLE OF HUMAN CAPITAL IN ECONOMIC GROWTH: EVIDENCE FROM GREEK REGIONS
S. Karagiannis, N.Benos. 2009.
The objective of this paper is to empirically examine the relation between human capital and economic growth for the Greek regions (NUTS III), for the period 1981-2003. We employ education indicators including the enrolment rates in lower and upper secondary education and the respective student/teacher ratios. Moreover, taking a broader view of human capital, we include two healthcare indicators – the number of medical doctors and hospital beds. Our estimations reveal that student enrolment rates at both levels of secondary education have a positive impact on growth, while a higher student-teacher ratio inhibits growth. Also, the number of medical doctors seems to boost growth. We define two regional groups (high and low income) and there is strong evidence of heterogeneity in rates of return to human capital. Besides these, there are important human capital externalities across neighbouring regions. Thus, the evidence implies the need for larger public spending on education and healthcare in all regions as a growth-enhancing policy. We believe that policy makers in Greece should take this into account in designing policies at the national and regional levels.