Human capital expansion and urban innovation

Abstract

The issue of how human capital expansion significantly influences urban innovation initiatives, is of great importance. Yet researchers have limited causal insights into whether human capital expansion can boost urban innovation. Using data on prefecture-level urban innovation indices between 2000 and 2016, and employing an intensity Difference-in-Differences (DID) strategy, we examine how the human capital expansion policy affects urban innovation. We find that prefectures with a higher number of universities experienced a greater gain in urban innovation after 2003. We also find that the expansion of human capital in science and engineering (S&E) fields plays the most significant role in promoting urban innovation. Finally, we investigate the mechanisms through which human capital expansion affects urban innovation. We find that the urban innovation-promoting effect of the human capital expansion program is partly channeled through its impact on increased innovative activities, producing a “talent agglomeration effect” and attracting immigrants.