A translog production function for the Spanish provinces: Impact of the human and physical capital in economic growth

A translog production function and an extended translog production function with third-order terms are estimated for the 50 Spanish provinces in the period 1985-2006. The results show the existence of complementarity relationships between private physical and human capital. Likewise, they show the existence of decreasing returns of private physical and human capital. However, the direction of the decreasing returns of private physical capital is reversed for a high endowment level of this factor. These results suggest the importance of capitalizing the Spanish economy, since it would increase the effect of human capital upon productivity and may also generate positive externalities.

► A translog and an extended translog production function are estimated. ► The results show the existence of decreasing returns of physical and human capital. ► For a high endowment level of physical capital, the decreasing returns are reversed.