The role of the education in economic development is addressed in an endogenous growth model with R&D. When human capital is below a threshold level, the model predicts that it is optimal to accumulate skills as the only growth generating activity, whereas both innovation activities and education drive growth above this level. Hence, a regime shift is triggered when the level of human capital reaches the threshold level, because it becomes profitable to innovate. Since technical progress and learning are processes that characterize industrialized countries, this suggests that the general level of education is important for industrialization.
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Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number
96-05.