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The role of human capital and innovation in economic development: evidence from post-Malthusian Prussia

Author

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  • Francesco Cinnirella

    (Ifo Institute)

  • Jochen Streb

    (University of Mannheim)

Abstract

The effect of human capital on growth involves multiple channels. On the one hand, an increase in human capital directly affects economic growth by enhancing labor productivity in production. On the other hand, human capital is an important input into R&D and therefore increases labor productivity indirectly by accelerating technological change. In addition, different types of human capital such as basic and higher education or training-on-the-job might play different roles in both production and innovation activities. We merge individual data on valuable patents granted in Prussia in the late nineteenth-century with county-level data on literacy, craftsmanship, secondary schooling, and income tax revenues to explore the complex relationship between various types of human capital, innovation, and income. We find that the Second Industrial Revolution can be seen as a transition period when it comes to the role of human capital. As in the preceding First Industrial Revolution, “useful knowledge” embodied in master craftsmen was related to innovation, especially of independent inventors. As in the subsequent twentieth century, the quality of basic education was associated with both workers’ productivity and firms’ R&D processes. In a final step, we show that literacy had also a negative effect on fertility which increased with innovation. In general, our findings support the notion that the accumulation of basic human capital was crucial for the transition to modern economic growth.

Suggested Citation

  • Francesco Cinnirella & Jochen Streb, 2017. "The role of human capital and innovation in economic development: evidence from post-Malthusian Prussia," Journal of Economic Growth, Springer, vol. 22(2), pages 193-227, June.
  • Handle: RePEc:kap:jecgro:v:22:y:2017:i:2:d:10.1007_s10887-017-9141-3
    DOI: 10.1007/s10887-017-9141-3
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    More about this item

    Keywords

    Human capital; Growth; Literacy; Innovation; Patents; Prussia;
    All these keywords.

    JEL classification:

    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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