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Human Capital, Technology Adoption and Development
1University of Chicago Booth School of Business, firstname.lastname@example.org
Citation Information: The B.E. Journal of Macroeconomics. Volume 11, Issue 1, Pages –, ISSN (Online) 1935-1690, DOI: 10.2202/1935-1690.1907, March 2011
- Published Online:
This paper presents a model of development in which skilled labor is an input in technology adoption. The model combines Nelson and Phelps (1966) type technology dynamics with a growth model in which intermediate goods are used to produce a final good. The intermediate good producers hire skilled labor to increase their productivity by adopting techniques from an exogenously evolving stock of world knowledge. I solve for the stationary equilibrium and derive analytic expressions for steady state income level and wage premium. In a quantitative exercise, I calibrate the model and compare its predictions with data. The model successfully accounts for cross-country income differences and within-country wage premia on skilled labor. These results strengthen the idea that different types of human capital perform separate tasks and should not be aggregated into a single stock of human capital in development accounting exercises. The availability of skilled labor is potentially much more important for development than such aggregative exercises have so far suggested.