Human Capital and Regional Entry of Firms

This paper studies the effect of human capital on the regional entry of firms. An econometric model for a system of disjoint regions and frequency data is constructed, making the comparison between the regions a random discrete choice problem. Empirical evidence from Swedish labour market regions for the manufacturing and the professional service sectors, 1986-1989, is presented. For both sectors, the share with higher education has a positive effect on the regional entry probability of firms in the medium range of the share variable. Sector specific experience has a positive but declining effect on the regional entry probability of firms in the professional service sector whereas it has a negative effect in the manufacturing sector. In relation to other variables in the models the levels of education have moderate effects while the shares with sector specific experience have larger impacts.