Abstract
We study the interplay between the decision of firms to innovate and human capital. Based on a dynamic evolutionary model, we show that in the presence of a high stock of human capital, an advanced economy can remain caught in an “innovation trap”. Following the literature on endogenous growth, R&D investments and human capital are modeled as strategic complements. Skilled workers increase productivity and enjoy a wage premium if they are employed in the R&D sector, while they receive the same wage as unskilled workers if they are employed in the production sector. We model the evolutionary dynamics of the share of innovative firms and human capital to determine the conditions under which an economy converges to a high, low or mixed state of innovation.
Funding source: Università degli Studi di Urbino Carlo Bo
Award Identifier / Grant number: Unassigned
Acknowledgments
We benefitted from discussions and comments from Costas Azariadis, Samuel Bowles, Gian Italo Bischi, Giorgio Calcagnini, Oded Galor, Mauro Gallegati, Laura Gardini, Germana Giombini, Lawrence Katz, Davide Ticchi, Laura Veldkamp, and Ping Wang. We also thank seminar participants at: MDEF 2018, 10th Workshop Modelli Dinamici in Economia e Finanza -Dynamic Models in Economics and Finance at the University of Urbino Carlo Bo, and The Workshop on Non-linear Dynamics in Economics and Finance (2018) at the Facolta di Economia, Universita Politecnica delle Marche. This research work has been developed in the framework of the research project on “Models of behavioral economics for sustainable development” supported by DESP-University of Urbino. The usual disclaimer applies.
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Conflict of Interest Statement: The authors declare that they have no conflict of interest.
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© 2021 Walter de Gruyter GmbH, Berlin/Boston
Articles in the same Issue
- Frontmatter
- Contributions
- Occupational Choice and Investments in Human Capital in Informal Economies
- Asymmetric Effects of Monetary Policy
- Trend Growth and Robust Monetary Policy
- Delegating Optimal Monetary Policy Inertia in a Small-Open Economy
- Dating Structural Changes in UK Monetary Policy
- International Historical Evidence on Money Growth and Inflation: The Role of High Inflation Episodes
- Inequality, Growth, and Congestion Externalities
- The Neoclassical Growth Model and the Labor Share Decline
- Environmental Taxes and Economic Growth with Multiple Growth Engines
- Macrodynamic Modeling of Innovation Equilibria and Traps
- Advances
- Unraveling News: Reconciling Conflicting Evidence
- Did the FED React to Asset Price Bubbles?
- Agricultural Trade and Structural Change: Evidence from Paraguay
Articles in the same Issue
- Frontmatter
- Contributions
- Occupational Choice and Investments in Human Capital in Informal Economies
- Asymmetric Effects of Monetary Policy
- Trend Growth and Robust Monetary Policy
- Delegating Optimal Monetary Policy Inertia in a Small-Open Economy
- Dating Structural Changes in UK Monetary Policy
- International Historical Evidence on Money Growth and Inflation: The Role of High Inflation Episodes
- Inequality, Growth, and Congestion Externalities
- The Neoclassical Growth Model and the Labor Share Decline
- Environmental Taxes and Economic Growth with Multiple Growth Engines
- Macrodynamic Modeling of Innovation Equilibria and Traps
- Advances
- Unraveling News: Reconciling Conflicting Evidence
- Did the FED React to Asset Price Bubbles?
- Agricultural Trade and Structural Change: Evidence from Paraguay