The Effectiveness of Regional Human Capital Distribution and Economic Development

Abstract

ABSTRACT The article considers the relationship between the size of human capital, human migration, investment in human capital, and economic growth. We apply a modified version of the gravity model, according to which migration flows are directed toward megacities (gravity centers). First, our model incorporates the cost of human migration (associated with lower returns on human capital due to the growing cost of living in megacities), and second, it incorporates the elasticity coefficient, which is influenced by the quality of regional government. Several hypothesized correlations are tested: between investment in fixed assets and regional human capital; between migration and human capital; between migration and the presence of megacities in a region; and between migration and investment in human capital. We estimate how much revenue is lost because of the current regional structure of the economy and conclude that regional structural changes in the Russian economy are inevitable.