How did the Cross-Prefectural Difference of Human Capital Change in Japan?

We construct a cross-prefectural index of human capital that captures the quality of the labor force available to the 47 Japanese prefectures from 1970 through 2008 using the Population Census. Our index is based on the index number concept proposed by Caves, Christensen, and Diewert (1982), and it takes into account the workers' educational background, gender, age, and their employed industries concurrently. Although the difference in the quality of the labor force among Japanese prefectures greatly converged in the 40 years from 1970, there still remains a significant gap to such an extent that the level of quality of the highest prefecture is 1.3 times that of the lowest. The main sources of the difference are both the workers' educational background and their employed industries in 1970, but the latter—regional industrial location factor—has diminished recently. The migration of young workers to more prosperous prefectures does contribute to the enlargement of the cross-prefectural difference in the total amount of human capital, but it contributes surprisingly little to the prefectural difference in the quality of human capital.