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Technological Change, Investment in Human Capital, and Economic Growth

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  • Yong Jin Kim
  • Jong-Wha Lee

Abstract

This paper presents a theoretical model to analyze the effects of technology change on growth rates of income and human capital. We set up an overlapping generations model in which young agents invest in both width and depth of human capital in order to adopt new technologies. The model develops explicitly the micro-mechanism of the role of human capital in adopting new technologies as well as that of the process of human capital production. In our model an increase in the technology uncertainty decreases growth rates of income and human capital by lowering efficiencies both in creating new knowledge and in adopting new technologies. We also show that, depending on the initial structure of human capital and the uncertainty about the nature of new technologies, an economy can have multiple growth paths. Hence, increased inflows of new technologies with more uncertain characteristics may affect human capital accumulation and income growth adversely, leading the economy to a low growth trap. Keywords: education, endogenous growth, human capital investment, technology adoption.

Suggested Citation

  • Yong Jin Kim & Jong-Wha Lee, 1999. "Technological Change, Investment in Human Capital, and Economic Growth," CID Working Papers 29, Center for International Development at Harvard University.
  • Handle: RePEc:wop:cidhav:29
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    File URL: http://www.cid.harvard.edu/cidwp/pdf/029.pdf
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    References listed on IDEAS

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    1. Helpman, Elhanan & Rangel, Antonio, 1999. "Adjusting to a New Technology: Experience and Training," Journal of Economic Growth, Springer, vol. 4(4), pages 359-383, December.
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    7. Foster, Andrew D & Rosenzweig, Mark R, 1996. "Technical Change and Human-Capital Returns and Investments: Evidence from the Green Revolution," American Economic Review, American Economic Association, vol. 86(4), pages 931-953, September.
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    13. Barro, Robert J & Lee, Jong Wha, 1996. "International Measures of Schooling Years and Schooling Quality," American Economic Review, American Economic Association, vol. 86(2), pages 218-223, May.
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    23. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Bildirici, M. & Orcan, M. & Sunal, S. & Aykaç, E., 2005. "Determinants of Human Capital Theory, Growth and Brain Drain: An Econometric Analysis for 77 Countries," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 5(2).
    2. Marcelo P. Dabós & Ernesto Gantman, 2010. "The Fading Link? A New Empirical Analysis of the Relationship Between Financial Development and Economic Growth," Working Papers 2010-013, Becker Friedman Institute for Research In Economics.

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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