Human capital development, knowledge spillovers and local growth: Is there a quality effect of university efficiency?

In this paper, we test whether economic growth depends on human capital development using data disaggregated at territorial level and propose the use of efficiency estimates, measured using a non-parametric technique, as an alternative quality measure of higher education institutions (HEIs). The nature of knowledge spillovers is also taken into account to examine the existence of geographically localized spillovers, from the presence of efficient universities, on local growth. Results show that the efficiency of universities has a positive and significant effect on GDP per worker. Moreover, we find evidence that productivity gains are larger in areas in which the most efficient universities are located, suggesting that investment in tertiary education may affect geographical distribution of economic activity as well as its level.