Human Capital, Agglomeration Economies and Regional Economic Growth

Education is widely recognized one of main sources for growth. This paper attempts to incorporate the general recognition into formal regional growth model. The model structure is largely neoclassical. It produces a single good with the two factors, educated labor and non-educated labor, via a constant return production migrating to the region with the higher real wage. The educated labor in a region is accumulated by two sources, migration and physical education capital, while the non-educated labor is by only migration. The paper shows that regional growth equilibrium is characterized as a saddle point. This indicates the presence of the minimum threshold size that must be overcome before a region may grow. It contrasts sharply with results obtained in regional growth models. The paper suggests that regional growth is determined less by the technical characteristics of regional production function characteristics of regional production function but by the stock combination of educated function but by the stock combination of education labor and non-educated labor. Based on this result, the impact of agglomeration economies on regional growth is explored. It is by phase diagram demonstrated that the presence of agglomeration economies do not always lead a region to growth since there still exists the minimum threshold even in the presence of agglomeration economies.