Population Density, Human Capital and Productivity

Becker, Glaeser and Murphy (1999) argue that 1) in densely populated societies the capital-dilution effect caused by a larger workforce is more than compensated by the positive effect on productivity of the increased specialization brought about by population density; 2) technological innovation will be faster in more densely populated areas; 3) when population density increases, there is a higher incentive for investment in human capital, because the productivity of human capital is higher in more densely populated regions. In this paper this proposition is empirically tested. The idea that a bigger and/or denser population might produce increasing returns to investment in human capital (particularly to education), accelerate technological innovation and ignite economic growth is both appealing and sensible. The question of this study is: How strong and robust –if it exists- is the positive influence of population density on technological progress, human capital investment and ultimately on productivity? The results of this research paper indicate that it is fairly strong, and they open new questions regarding possible further research on this field.