IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/14138.html
   My bibliography  Save this paper

The Knowledge Trap: Human Capital and Development Reconsidered

Author

Listed:
  • Benjamin F. Jones

Abstract

This paper presents a model where human capital differences - rather than technology differences - can explain several central phenomena in the world economy. The results follow from the educational choices of workers, who decide not just how long to train, but also how broadly. A "knowledge trap" occurs in economies where skilled workers favor broad but shallow knowledge. This simple idea can inform cross-country income differences, international trade patterns, poverty traps, and price and wage differences across countries in a manner broadly consistent with existing empirical evidence. The model also provides insights about the brain drain, migration, and the role for multinationals in development. More generally, this paper shows that standard human capital accounting methods can severely underestimate the role of education in development. It shows how endogenous educational decisions can replace exogenous technology differences in a range of economic reasoning.

Suggested Citation

  • Benjamin F. Jones, 2008. "The Knowledge Trap: Human Capital and Development Reconsidered," NBER Working Papers 14138, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:14138 Note: ED EFG PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w14138.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Ananth Seshadri & Rodolfo Manuelli, 2005. "Human Capital and the Wealth of Nations," 2005 Meeting Papers 56, Society for Economic Dynamics.
    2. Benjamin F. Jones, 2009. "The Burden of Knowledge and the "Death of the Renaissance Man": Is Innovation Getting Harder?," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 283-317.
    3. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory and Evidence," The Quarterly Journal of Economics, Oxford University Press, vol. 113(1), pages 79-119.
    4. Caselli, Francesco, 2005. "Accounting for Cross-Country Income Differences," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 9, pages 679-741 Elsevier.
    5. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters,in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 299-322 National Bureau of Economic Research, Inc.
    6. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    7. Harrigan, James, 1997. "Technology, Factor Supplies, and International Specialization: Estimating the Neoclassical Model," American Economic Review, American Economic Association, vol. 87(4), pages 475-494, September.
    8. Friedberg, Rachel M, 2000. "You Can't Take It with You? Immigrant Assimilation and the Portability of Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 221-251, April.
    9. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-987, December.
    10. Heckman, James J. & Lochner, Lance J. & Todd, Petra E., 2006. "Earnings Functions, Rates of Return and Treatment Effects: The Mincer Equation and Beyond," Handbook of the Economics of Education, Elsevier.
    11. Lutz Hendricks, 2002. "How Important Is Human Capital for Development? Evidence from Immigrant Earnings," American Economic Review, American Economic Association, pages 198-219.
    12. Ciccone, Antonio & Matsuyama, Kiminori, 1996. "Start-up costs and pecuniary externalities as barriers to economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 33-59, April.
    13. Daron Acemoglu, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 445-464.
    14. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
    15. Charles I. Jones, 1997. "On the Evolution of the World Income Distribution," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 19-36, Summer.
    16. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    17. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    18. Rodriguez-Clare, Andres, 1996. "The division of labor and economic development," Journal of Development Economics, Elsevier, vol. 49(1), pages 3-32, April.
    19. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Relative Prices and Relative Prosperity," American Economic Review, American Economic Association, vol. 97(3), pages 562-585, June.
    20. Kim, Sunwoong, 1989. "Labor Specialization and the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 692-705, June.
    21. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2007. "Contracts and Technology Adoption," American Economic Review, American Economic Association, vol. 97(3), pages 916-943, June.
    22. Caselli, Francesco, 2005. "Accounting for cross-country income differences," LSE Research Online Documents on Economics 3567, London School of Economics and Political Science, LSE Library.
    23. Bowen, Harry P & Leamer, Edward E & Sveikauskas, Leo, 1987. "Multicountry, Multifactor Tests of the Factor Abundance Theory," American Economic Review, American Economic Association, vol. 77(5), pages 791-809, December.
    24. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
    25. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281-281.
    26. Lant Pritchett, 1997. "Divergence, Big Time," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 3-17, Summer.
    27. Peter J. Klenow & Mark Bils, 2000. "Does Schooling Cause Growth?," American Economic Review, American Economic Association, vol. 90(5), pages 1160-1183, December.
    28. Bhagwati, Jagdish N, 1984. "Why Are Services Cheaper in the Poor Countries?," Economic Journal, Royal Economic Society, vol. 94(374), pages 279-286, June.
    29. Maskus, Keith E., 1985. "A test of the Heckscher-Ohlin-Vanek theorem: The Leontief commonplace," Journal of International Economics, Elsevier, vol. 19(3-4), pages 201-212, November.
    30. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
    31. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 779-804.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Malgorzata Wachowska, 2014. "Excessive Accumulation Of Knowledge As A Challenge To Science Policy," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 9(3), pages 29-40, September.
    2. Cuntz, Alexander & Czernich, Nina & Dauchert, Helge & Meurer, Petra & Philipps, Annika, 2015. "Gesellschaftliche Dimensionen von Innovation: Zentrale Fragen und Datenlage," Studien zum deutschen Innovationssystem 18-2015, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin.
    3. Mohammadi, Ali & Broström, Anders & Franzoni, Chiara, 2015. "Work Force Composition and Innovation: How Diversity in Employees’ Ethnical and Disciplinary Backgrounds Facilitates Knowledge Re-combination," Working Paper Series in Economics and Institutions of Innovation 413, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    4. Das, Gouranga Gopal, 2015. "Why some countries are slow in acquiring new technologies? A model of trade-led diffusion and absorption," Journal of Policy Modeling, Elsevier, vol. 37(1), pages 65-91.
    5. Ajay Agrawal, 2014. "Diaspora Networks, Knowledge Flows and Brain Drain," WIPO Economic Research Working Papers 15, World Intellectual Property Organization - Economics and Statistics Division.
    6. Christian Groth & Jakub Growiec, 2017. "Do Mincerian Wage Equations Inform How Schooling Influences Productivity?," EUSP Department of Economics Working Paper Series 2017/04, European University at St. Petersburg, Department of Economics.
    7. Jaimovich, Esteban, 2011. "Sectoral differentiation, allocation of talent, and financial development," Journal of Development Economics, Elsevier, vol. 96(1), pages 47-60, September.
    8. Timothy Simcoe, 2012. "Standard Setting Committees: Consensus Governance for Shared Technology Platforms," American Economic Review, American Economic Association, vol. 102(1), pages 305-336, February.
    9. Vidya Atal & Kaushik Basu & John Gray & Travis Lee, 2010. "Literacy traps: Society-wide education and individual skill premia," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(1), pages 137-148.
    10. Michaels, Guy, 2010. "Challenges for research on resource-rich economies," LSE Research Online Documents on Economics 55256, London School of Economics and Political Science, LSE Library.
    11. Franzoni, Chiara & Scellato, Giuseppe & Stephan, Paula, 2014. "The mover’s advantage: The superior performance of migrant scientists," Economics Letters, Elsevier, vol. 122(1), pages 89-93.
    12. Boh, Wai Fong & Evaristo, Roberto & Ouderkirk, Andrew, 2014. "Balancing breadth and depth of expertise for innovation: A 3M story," Research Policy, Elsevier, vol. 43(2), pages 349-366.
    13. Ajay Agrawal & Avi Goldfarb & Florenta Teodoridis, 2013. "Does Knowledge Accumulation Increase the Returns to Collaboration?," NBER Working Papers 19694, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14138. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/nberrus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.