The Impact of Human Capital Endowments on International Competitiveness, with Special Reference to Transition Economies

The aim of this thesis is to investigate the impact of human capital endowments on international competitiveness, with special reference to transition economies. This investigation is based on country, industry and firm level estimations using longitudinal and cross section data for the period 1995-2010 and 2011-2014, respectively. The theoretical framework informing this empirical investigation proposes a relationship between human capital and international competitiveness through the underlying mechanism of labour productivity and innovation. More educated and higher skilled individuals are more likely to innovate and/or adopt and use efficiently new sophisticated technologies which, consequently, boosts labour productivity. In turn, more productive firms and countries are more likely to maintain and/or develop their international competitiveness. In this investigation, the degree of international competitiveness is measured by export market share, relative export advantage, the share of medium and high tech exports, export sophistication, and export intensity. Human capital is represented by educational attainment, the quality of education, and provision/participation in training programmes. To empirically test the human capital-international competitiveness nexus, a diversified modelling strategy has been employed. In line with theoretical underpinnings, human capital endowments appear to exert a positive and significant impact on export market share at both country and industry levels, though this effect is not replicated when the relative export advantage index is taken as the measure of international competitiveness. The share of the population with tertiary education seems to exert a positive impact on the share of medium and high-tech manufactures exported by the EU-27, the impact being relatively stronger in the high tech category. No supporting evidence is found for the influence of the quality of education, irrespective of the international competiveness measure used. In the export sophistication sub-analysis, the estimated results suggest that the share of population with tertiary education has a positive impact only on the level of export sophistication of the EU-17. Consistent with previous research, the firm level results suggest that having a more educated workforce exerts a positive and statistically significant impact on the export intensity and export market share of firms in 30 transition economies. Mixed evidence is found for the role of on-the-job training programmes and years of experience of the top manager. The empirical evidence obtained in this investigation has potentially useful policy implications for European and Euro-Asian countries seeking to sustain or increase their international competitiveness.