The Creative Class or Human Capital? Explaining Regional Development in Sweden

The role of talent and creativity in economic development has been a subject of growing interest to social scientists. Human capital is observed both to be an important contributor to growth and to be unevenly distributed geographically. While there is consensus on the importance of human capital to economic development, debate takes shape around two central issues. First, there is the question of how best to measure human capital. The conventional measure of human capital is based on educational attainment (share of population with a bachelor's degree and above). But more recent research suggests that it is more important to measure what people do than what they study, and thus occupationally based measures, associated principally with creative class occupations, have been introduced. Second, there is debate over the factors that yield the geographic distribution of human capital in the first place. Three alternative factors have been found to play a role: universities; amenities (measured here as diversity of service industries); and openness and tolerance. To shed light on these issues, our research employs structural equations and path analysis models to examine the independent effects of human capital, the creative class, and technology on regional development. It also seeks to account for the factors that shape and affect the geographic distribution of human capital and the creative class across 81 Swedish regions. The dependent variable is regional wages and independent variables include measures of human capital, the creative class, university presence, amenities (i.e., service diversity), and tolerance. We find that the creative class measures outperform conventional educational measures in accounting for regional development across our sample of Swedish regions. We also find that universities, amenities or service diversity, and openness and tolerance affect the distribution of human capital. These factors do not operate in competition with one another, but tend to attract or affect different types of talent. They can be thus said to play complementary roles in the geographic distribution of talent.