Regional Heterogeneity in the Private and Social Returns to Human Capital

Abstract It is thought that policies aimed at encouraging the accumulation of human capital in less productive regions can constitute a key factor in development. However, the effectiveness of this policy depends in large part on each region's capacity to give returns to human capital. The aim of this article is to demonstrate the existence of substantial spatial variations in private and aggregate returns to human capital, indicating that development policies based on stimulating the accumulation of education differ in effectiveness. Results for the Spanish regions suggest that regional variations in social returns are greater than those in private returns.