Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: This paper presents an empirical analysis of the relationship between human capital endowments and the structure of regional export flows. Since the development of each export product may be assumed to be associated with innovation activity, requiring human capital inputs, the core hypothesis tested in this paper is that cross-regional variations in endowments of human capital influence the extensive margin (number of export products) rather than the intensive margin (average export value per product). The hypothesis is tested in a cross-regional regression model, applied to aggregate and within-industry export flows from Swedish regions. The empirical results confirm the theoretical prediction that the response of regional export flows to cross-regional variations in human capital is an increase in the extensive margin. To the extent that the regional human capital endowment affects the intensive margin, the effect is a higher average price per export product.

Keywords: product differentiation; knowledge; human capital; accessibility; export diversity; extensive margin; economies of scale

JEL-codes: F12; F14; R12; R32

32 pages, September 28, 2009

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