The Knowledge Trap: Human Capital and Development Reconsidered

42 Pages Posted: 30 Jun 2008 Last revised: 29 Oct 2014

Date Written: June 2008

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

Jones, Benjamin F., The Knowledge Trap: Human Capital and Development Reconsidered (June 2008). NBER Working Paper No. w14138. Available at SSRN: https://ssrn.com/abstract=1152679

Benjamin F. Jones (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-3177 (Phone)
847-467-1777 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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