Human Capital and Innovation: a model of endogenous growth with a “skill-loss effect”

LONDON SILVIA, BRIDA JUAN GABRIEL, RISSO WISTON ADRIAN

Termas de Cauquenes, Chile

Workshop; 2007 WPEG; 2007

Universidad Nacional de Santiago

There exist two basic frameworks in which the relationship between education and growth can be modelled and analyzed. The first one was introduced by Lucas (1988), who emphasized on human capital accumulation as an alternative source of sustained growth, instead of only technological change. The second approach goes back to the seminal work of Nelson and Phelps (1966), in which growth is described as being driven by the stock of human capital (HK), which in turn affects the ability to innovate. Both approaches yield insights on the growth effects of educational policies. Further theoretical and empirical studies showed that the divergence in growth rates across countries could be due not so much to differences in the rates of accumulation of HK, as suggested by Lucas, but to differences in the corresponding levels (see for example Benhabib and Spiegel, 1994). Further theoretical and empirical studies showed that the divergence in growth rates across countries could be due not so much to differences in the rates of accumulation of HK, as suggested by Lucas, but to differences in the corresponding levels (see for example Benhabib and Spiegel, 1994). The present paper argues that, in line with the Nelson-Phelps approach, there exist important complementarities among educational attainment, R&D activities (and their derived innovations) and economic growth, although subject to a “skill-loss effect” (which we call -effect), due to the presence of workers who have to perform jobs that require other (or lower) capacities than the ones they have. The present paper argues that, in line with the Nelson-Phelps approach, there exist important complementarities among educational attainment, R&D activities (and their derived innovations) and economic growth, although subject to a “skill-loss effect” (which we call -effect), due to the presence of workers who have to perform jobs that require other (or lower) capacities than the ones they have. Section I describes the -effect, that can be identified with the loss of acquired knowledge, as a result of a disequilibrium in the labour market. Section II presents a formal model along the lines of Redding (1996), in which we introduce the parameter . Section III analyses the empirical evidence for several countries for the parameter . Section VI examines some policy implications and presents the conclusions. Section I describes the -effect, that can be identified with the loss of acquired knowledge, as a result of a disequilibrium in the labour market. Section II presents a formal model along the lines of Redding (1996), in which we introduce the parameter . Section III analyses the empirical evidence for several countries for the parameter . Section VI examines some policy implications and presents the conclusions. JEL classification: O41, C0 JEL classification: O41, C0 Key words: endogenous growth – human capital – education