Human capital is today an important determinant of economic growth. However, evidence on its long-run regional development in Europe is still relatively limited. For this reason, this paper investigates the development of human capital in the European regions over the last 200 years. It indicates that “the long shadow of history” plays an important role in the regional distribution of human capital.
The paper indicates that there has been a striking regional distribution of human capital in the past. The most advanced regions were typically located in the core industrialised countries, whereas the lowest values of human capital were found in the Western, Southern and Eastern periphery. This core-periphery structure was relatively time persistent for longer time periods. Regional inequalities in human capital have also been immense within a number of European countries.
Why are some countries more unequal than others, especially in terms of human capital endowment? Clearly, there is a huge literature on this issue. I have discussed, among other things, the important impact of geography (e.g., distance to large markets) and the level of economic development. Other additional factors can be the influence of various stakeholders. Government policy has to consider the interests of powerful societal stakeholders, as has been shown in the case of landowners in a historical context (see Baten and Hippe [2018]), to implement its policies. Policy makers need to focus on providing an environment that produces incentives for individuals to increase their human capital in keeping with economic conditions, particularly in periphery countries. However, some (members of) governments may not always be willing to advance social, educational or economic progress due to their own vested interests in the status quo. Other major stakeholder groups such as businesses, civil society and the media may help to put pressure on the successful implementation of long-run growth enhancing policies.
Still, the incentives for an individual at the micro level have also to be taken into account. If individuals in peripheral regions have lower incentives to invest in their own human capital, then particular efforts have to be made to overcome the crucial threshold so that it becomes profitable for them to become more educated. At the same time it is important to increase these incentives by connecting peripheral regions more to core regions. This can be done by, e.g., investing in infrastructure.
However, this may not be sufficient – instead, a broader societal emphasis on education as a means to individual and collective prosperity has to be pushed forward. This educational push would generate a collective awareness of the key importance of human capital for individual wellbeing and a country’s economic growth, creating the required incentives for all parties to increase their human capital; see Ramirez and Boli [1987] for a historical discussion). For example, the strong focus on education by individuals and the government alike may have significantly contributed to the fact that while more than half of the South Korean population was still illiterate after the end of World War II (Lee et al. [2012]), the country is now a top-performer in OECD’s PISA tests. Thus, governments can take various measures, not only providing additional finance, but also push in symbolic terms and regulation to raise awareness and increase incentives so that individuals educate themselves further. In addition, educational policies have to be designed in a way that explicitly addresses regional and local levels because these levels are crucial for the actual implementation of policies fostering human capital. Otherwise it is possible that, for example, national education laws are not successfully increasing actual educational and skills levels, as has been seen in the case of the compulsory schooling laws in a number of Southern European countries in the 19th century.
The knowledge and know-how of international organisations and the insights from specialised researchers may contribute to the design of these policies in developing and advanced economies alike. International studies such as the famous ongoing PISA studies that compare a range of worldwide countries may open a public and governmental debate on the education system (e.g., Carvalho and Costa [2015]).
At the same time, the negative effects of increased educational competition, i.e., potentially increased societal and regional inequalities, have to be counteracted by specifically targeted equity-enhancing education policies (see Hippe et al. [2016], Hippe et al. [2018], Hippe and Jakubowski [2018]).
Still, we may be at the brink of a new human capital era. Rapid sociotechnological changes have been stressing the importance of lifelong learning. While basic skills such as numeracy and literacy have been relevant in the past and present, generic skills (such as problem solving, online “information mining”) (Collins and Halverson [2010]) and digital skills may be very important in the future (Kampylis et al. [2015], Carretero et al. [2017]). In particular, digital skills are already increasingly needed today, and they will become even more crucial in the years to come (McKinsey Global Institute [2018]). Policy makers are more and more aware of this development. For example, the European Commission has recently set up the Digital Education Action Plan in 2018, including eleven actions to improve digital education in Europe (European Commission [2018]), such as a new tool called SELFIE. It is a self-reflection tool that supports schools in going digital and in their use of digital technologies for learning (Castano Munoz et al. [2018]). The tool is available in all 24 official EU languages (and some other languages following soon) and can be used by schools worldwide.
More generally, the internet may provide new incentives and many different kinds of tools to improve human capital levels. For example, the developments in e-learning and Massive Open Online Courses are still in their infancy in comparison to their huge potential, but they are already increasingly used, especially as lifelong learning tools (Castano Munoz et al. [2017]). They may constitute scalable low cost alternatives and supplements to the traditional school and learning system.
In consequence, those countries that are not yet heavily entrenched in the traditional schooling model, or are ready to rapidly and profoundly change it, may find more easily new, creative and low-cost solutions to their human capital challenge if they are able to combine these new opportunities with their local economic, social, religious and political culture. In this context, getting the incentives right for all stakeholders and designing an appropriate institutional framework appears to be fundamental to implement efficient growth-enhancing policies in both industrialised and developing countries.
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