Human capital is supposed to be an important factor for innovation and economic development. However, the long-run impact of human capital on current innovation and economic development is still a black box, in particular at the regional level. Therefore, this paper makes the link between the past and the present. Using a large new dataset on regional human capital and other factors in the 19 th and 20 th century, we find that past regional human capital is a key factor explaining current regional disparities in innovation and economic development.

We find a relationship between geographic factors and numeracy in more than 300 regions of Europe around the year 1900. We argue that the distribution of land ownership is a plausible mechanism, given that it is related to the geographic factors under study. Consistent with theoretical studies in the Unified Growth Theory framework, we find that inequality in land distribution has a negative correlation with human capital formation as landowners did not have incentives to promote educational institutions or were not willing to pay the necessary taxes. This study explains a substantial share of the differences in development gradients between rural European regions in a historical perspective.

Recent theoretical advances reveal the importance of human capital for long-run economic growth. However, the absence of data makes it difficult to measure human capital before 1870 at the national level, let alone at the regional level within countries. By using the age heaping method and a large, new data set, we approximate the numeracy values in more than 570 regions in Europe between 1790 and 1880. The results indicate a significant gap in numeracy levels between advanced west and central European countries and the rest of Europe. Nevertheless, differences in basic numeracy between and within countries became smaller over the nineteenth century, as the periphery solved its basic numeracy problem.

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