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

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.

Automated summary

This paper examines the long-term patterns of geographical disparities in human capital and income in Finland and Sweden from 1987 to 2015. Contrary to many other developed economies, there are indications of inter-regional convergence in per capita earnings in both countries after 2000, but small and peripheral regions have not fully recovered from the macroeconomic shocks in the 1990s. Disparities in human capital and earnings at the intra-regional scale are relatively large and persistent, especially within metropolitan labor markets.