Patterns of inter- and intra-regional differences in human capital and earnings: Evidence from Finland and Sweden 1987–2015

Kent Eliasson,Mika Haapanen,Olle Westerlund

doi:10.1016/j.apgeog.2021.102539

Kent Eliasson, Mika Haapanen + Show 1 more

Open Access

https://doi.org/10.1016/j.apgeog.2021.102539

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Abstract

In this paper, we examine the long-term patterns of geographical disparities in human capital and income in Finland and Sweden over the period 1987–2015. Using nationwide longitudinal population register data, we analyze disparities at different spatial scales, between and within functional labor market regions determined by observed travel-to-work patterns. Contrary to the findings from many other developed economies indicating inter-regional divergence in per capita income, we find indications of inter-regional convergence in per capita earnings among the functional labor market regions in both countries after 2000. However, small, and peripheral regions have not recovered from the macroeconomic shocks in the 1990s, in terms of per capita earnings. Our estimates indicate relatively small and statistically insignificant changes in the geographical dispersion of human capital at the inter-regional scale. At the intra-regional scale, the disparities in human capital and earnings between the core and hinterlands are relatively large and persistent, although some evidence of convergence is found for Finland. The largest intra-regional differences in human capital and earnings are found within the metropolitan labor markets.

Highlights

Research has identified a slower rate of convergence or even diver gence in income and human capital levels in several developed econo mies since the turn of the millennium (Austin et al, 2018; Butkus et al, 2018; Ganong & Shoag, 2017; Iammarino et al, 2019)
We find that patterns of intra-regional disparities show some interesting dissimilarities between the defini tions of place based on residential locations or location of workplaces
Within the large metropolitan labor markets (LMRs), the working-age population has increased in all local labor market areas, but the increase was largest in the adjacent areas in Finland (38%) and core areas in Sweden (46%)

Summary

Introduction

Research has identified a slower rate of convergence or even diver gence in income and human capital levels in several developed econo mies since the turn of the millennium (Austin et al, 2018; Butkus et al, 2018; Ganong & Shoag, 2017; Iammarino et al, 2019). Structural change in production and trade has for long induced the spatial concentration of labor and capital in developed economies, generally accompanied by regional income convergence (Barro & Sala-i-Martin, 2004) This development may be explained by the economies of agglomeration favoring urbanization (Duranton & Puga, 2004) and neo-classical adjustments reducing regional differences in real wages and per capita income, for example, by geographical labor mobility from smaller to larger and more populous regions and by increased concentration of labor supply to core areas within local labor markets. We present comparable estimates of inter-regional convergence in human capital and income across functional labor markets in two Nordic welfare states (Finland and Sweden) sharing important socioeconomic and institutional settings.

Data and variables

Inter-regional dispersion of human capital and earnings

Human capital

Earnings

Findings

Summary and discussion