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Tapping into Talent: Coupling Education and Innovation Policies for Economic Growth

Author

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  • Ufuk Akcigit
  • Jeremy Pearce
  • Marta Prato

Abstract

How do innovation and education policy affect individual career choices and aggregate productivity? This paper analyses the effect of R&D subsidies and higher education policy on productivity growth through the supply of innovative talent. We put scarce talent, higher education attainment, and career choice at the centre of a new endogenous growth framework with individual-level heterogeneity in talent, financial resources, and preferences. We link the model to micro-level data from Denmark on the backgrounds of who obtains a PhD and becomes an inventor and the outcomes of a set of policy interventions. We find that R&D subsidies can be strengthened when combined with higher education subsidies, which enable talented but poor youth to pursue a career in research. Education and innovation policies not only alleviate different frictions, but also impact innovation at different time horizons. Education policy is more effective in societies with higher income inequality.

Suggested Citation

  • Ufuk Akcigit & Jeremy Pearce & Marta Prato, 2025. "Tapping into Talent: Coupling Education and Innovation Policies for Economic Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 92(2), pages 696-736.
    • Handle: RePEc:oup:restud:v:92:y:2025:i:2:p:696-736.
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    File URL: http://hdl.handle.net/10.1093/restud/rdae047
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    Cited by:

    1. Kang, Yankun & Leng, Xuan & Liao, Yunxiang & Zheng, Shilin, 2024. "Information disclosure, spillovers, and knowledge accumulation," China Economic Review, Elsevier, vol. 84(C).
    2. Elodie Andrieu & John Morrow, 2024. "Can Firm Subsidies Spread Growth?," PSE Working Papers halshs-04721319, HAL.
    3. Akcigit, Ufuk & Goldschlag, Nathan, 2023. "Where Have All the "Creative Talents" Gone? Employment Dynamics of US Inventors," CEPR Discussion Papers 18035, C.E.P.R. Discussion Papers.
    4. Ufuk Akcigit & Nathan Goldschlag, 2025. "Measuring the characteristics and employment dynamics of U.S. inventors," Journal of Economic Growth, Springer, vol. 30(2), pages 237-269, June.
    5. Marchiori, Carmen & Minelli, Enrico, 2023. "Talent, basic research and growth," Journal of Economic Theory, Elsevier, vol. 213(C).
    6. Sarah McNamara & Guido Neidhöfer & Patrick Lehnert, 2024. "Intergenerational Mobility of Education in Europe: Geographical Patterns, Cohort-Linked Measures, and the Innovation Nexus," Working Papers 664, ECINEQ, Society for the Study of Economic Inequality.
    7. Xiao Ma, 2024. "College Expansion, Trade, And Innovation: Evidence From China," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(1), pages 315-351, February.
    8. Maddalena Honorati & Indhira Santos & Indhira Santos, 2024. "Investing in Skills to Accelerate Job Transitions," World Bank Publications - Reports 42103, The World Bank Group.
    9. Stephen J. Terry & Thomas Chaney & Konrad B. Burchardi & Lisa Tarquinio & Tarek A. Hassan, 2026. "Immigration, Innovation, and Growth," American Economic Review, American Economic Association, vol. 116(3), pages 828-861, March.
    10. Elodie Andrieu & John Morrow, 2024. "Can Firm Subsidies Spread Growth?," PSE Working Papers halshs-04747880, HAL.
    11. Andrea Guccione & Pau Roldan-Blanco, 2026. "Economic Growth when Knowledge is Concentrated," Working Papers 1562, Barcelona School of Economics.
    12. Andrieu, Elodie & Morrow, John, 2024. "Can firm subsidies spread growth?," LSE Research Online Documents on Economics 126775, London School of Economics and Political Science, LSE Library.
    13. J. Vernon Henderson & Francisco Libano-Monteiro & Martina Manara & Guy Michaels & Tanner Regan, 2025. "Economics of Greenfield Urban Planning," Working Papers 2025-007, The George Washington University, The Center for Economic Research.
    14. Pernagallo, Giuseppe, 2024. "The student funding dilemma," The Journal of Economic Asymmetries, Elsevier, vol. 30(C).
    15. Carlos Esteban Posada, 2020. "Cambio técnico y política económica: la teoría y el caso colombiano (1950-2019)," Documentos de Trabajo de Valor Público 18506, Universidad EAFIT.
    16. Miklós Koren & Krisztina Orban, 2025. "Managers, Entrepreneurs, and the Allocation of Talent: Evidence from Hungary's Transition," CEU Working Papers 2025_2, Department of Economics, Central European University.
    17. Barbara Biasi & Song Ma, 2022. "The Education-Innovation Gap," CESifo Working Paper Series 9653, CESifo.
    18. Santiago Caicedo & Jeremy Pearce, 2024. "Need for Speed: Quality of Innovations and the Allocation of Inventors," Staff Reports 1127, Federal Reserve Bank of New York.
    19. Cao, Linyi & Jiang, Helu & Li, Guangwei & Zhu, Lijun, 2024. "Haste makes waste? Quantity-based subsidies under heterogeneous innovations," Journal of Monetary Economics, Elsevier, vol. 142(C).
    20. Andrea Bonaccorsi & Laura Barin & Paola Belingheri & Federico Biagi & Mabel Sanchez-Barrioluengo, 2024. "Is higher education more important for firms than research? Disentangling university spillovers," The Journal of Technology Transfer, Springer, vol. 49(3), pages 900-925, June.

    More about this item

    Keywords

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    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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