Human Capital, Technology Adoption and Development

37 Pages Posted: 22 Dec 2008 Last revised: 26 Jul 2014

Kerem Cosar

Stockholm School of Economics - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); Boğaziçi University - Center for Economics and Econometrics

Date Written: January 26, 2009

Abstract

This paper presents a model of development in which skilled labor is an input in technology adoption. The model combines Nelson and Phelps (1966) type technology dynamics with a growth model in which intermediate goods are used to produce a final good. The intermediate good producers hire skilled labor to increase their productivity by adopting techniques from an exogenously evolving stock of world knowledge. I solve for the stationary equilibrium and derive analytic expressions for steady state income level and wage premium. In a quantitative exercise, I calibrate the model and compare its predictions with data. The model successfully accounts for cross-country income differences and within-country wage premia on skilled labor. These results strengthen the idea that different types of human capital perform separate tasks and should not be aggregated into a single stock of human capital in development accounting exercises. The availability of skilled labor is potentially much more important for development than such aggregative exercises have so far suggested.

Keywords: Total Factor Productivity, Human Capital and Development

JEL Classification: O33, O41

Suggested Citation

Cosar, Kerem, Human Capital, Technology Adoption and Development (January 26, 2009). Available at SSRN: https://ssrn.com/abstract=1318453 or http://dx.doi.org/10.2139/ssrn.1318453

A. Kerem Cosar (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Boğaziçi University - Center for Economics and Econometrics ( email )

Bogazici Universitesi
Bebek
Istanbul, 34342
Turkey

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