This paper investigates the impact of human capital on the process of innovation and technology catch-up in European Union
countries. Based on the framework proposed by Benhabib and Spiegel (in: Aghion and Durlauf (eds) Handbook of economic growth,
1A, North-Holland, Amsterdam, 2005), a panel data model is estimated from 1950 to 2011 using the improved total factor productivity
and human capital variables included in PWT 8.0. Following Vandenbussche et al. (J Econ Growth 11(2):97-127, 2006) we also
analyse the differential impact of skilled and unskilled human capital on growth. The empirical analysis applies instrumental
variables panel data methods which resolve the endogeneity bias. Our results show robust evidence of the significant direct
and indirect effects of human capital on the process of total factor productivity growth in euro area countries. When we analyse
the impact of different kinds of human capital on different ways of increasing TFP we conclude that, regardless of academic
level, the quantity of unskilled human capital boosts imitation in EU countries while, by contrast, highly qualified human
capital is essential for growth through innovation.
