Chapter 9

Human Capital Convergence in Greece: A Panel Data Analysis

George L. Liaskos and Christos T. Papadas

Abstract

The neoclassical growth model has been supported by a large amount of regional and cross-country studies providing evidence of β -convergence. Nevertheless, it faces theoretical and empirical challenges which are still the subject of research on the dynamics of growth. Consideration of human capital accumulation has strengthened the theoretical foundations of the model, especially its open economy version. It has also improved the explanatory power of the model and its usefulness in quantitative analysis. Human capital accumulation accounts for that part of observed per capita income and output disparities, not explained adequately by the initial approach. Newer versions of neoclassical growth modeling imply clearly that the process of growth and convergence depends heavily on human capital accumulation and convergence. This study investigates regional human capital convergence in Greece during the period 1971-2001, for the census years of which necessary data are available. Following the usual practice in the literature, human capital quality is expressed in terms of educational achievement. Panel data econometric analysis is conducted using census year data for the Greek prefectures (NUTS III areas). The existence of human capital β -convergence is examined. Changes in the distributions of educational achievement, using different criteria, are also examined in order to see if actual convergence occurs. Results show that both space and time effects are significant and so is the established conditional -convergence. Nevertheless, actual convergence is not achieved over the examined period and the dispersion of the observed human capital distributions has been increasing.

Total Pages: 141-159 (19)

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