Human Capital Accumulation Across Space

Klaus Desmet, Dávid Krisztián Nagy and Esteban Rossi-Hansberg

No 2634, Working Papers from Federal Reserve Bank of Dallas

Abstract: This paper studies how human capital shapes the economic geography of development. We propose a model in which human capital acquisition costs vary across space, and regions with higher human capital invest more in human-capital-augmenting technology. Locations are interconnected through costly migration and trade. Using data on local income and schooling, we quantify the model at a 1° x 1° resolution globally. Over two centuries, the model mostly predicts persistence in the spatial distribution of development. Proportionally lowering education costs in sub-Saharan Africa raises local outcomes but lowers global welfare, while the same policy in Latin America improves global welfare. An alternative policy that equalizes educational costs across sub-Saharan Africa generates worse outcomes, as population shifts within the region toward less productive areas. These results are driven by the estimated negative correlation between education costs and local fundamentals, as well as spatial inefficiencies due to externalities.

Keywords: human capital; geography; development; education policy; global inequality; dynamic spatial models (search for similar items in EconPapers)
JEL-codes: E24 F10 I24 J24 O11 O18 O33 R12 R23 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2026-09-23
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:103849

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DOI: 10.24149/wp2634

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