The role of universities in regional development Endogenous human capital and growth in a two-region model

This paper proposes a dynamic two-region model with human capital accumulation. This economic system is assumed to produce two commodities – one in each region. The only university in the economy which carries out higher education (=teaching) is located in region 1. The model describes the dynamic interdependence between human capital accumulation, regional division of labour, the spatial price structure under perfect economic competition, and the government intervention in higher education. Thus the analysis examines how differences in human capital improvements and environmental conditions between the two regions affect the economic geography. Received: October 1998/Accepted: April 2000