Human capital, mechanisms of technological diffusion and the role of technological shocks in the speed of diffusion: evidence from a panel of Mediterranean countries

The purpose of this paper is to assess the importance of human capital as a facilitator of technological diffusion in a sample of developing Mediterranean countries based on the predictions of endogenous growth theory. The evidence does not support the Benhabib and Spiegel (2002) non-linear specification that accommodates both the hypothesis of technological convergence and convergence clubs but the linear specification originally proposed by Benhabib and Spiegel (1994), confirming a role for human capital in both innovation and imitation activities. We also tested the complementarity between FDI, a form of embodied technology diffusion, and human capital but this hypothesis was not confirmed and investigated the importance of human capital for the diffusion of ICT confirming it is fundamental to benefit from these technologies. Finally, we analysed the importance of technological shocks for technological diffusion using a VAR model finding evidence of factor complementarity between TFP, physical capital investment and human capital in the absorption of any of the shocks considered.