Infrastructure and Industrial Development with Endogenous Skill Acquisition

22 Pages Posted: 10 Oct 2018

See all articles by Pierre-Richard Agenor

Pierre-Richard Agenor

University of Manchester - School of Social Sciences

Barış Alpaslan

Ege University

Date Written: October 2018

Abstract

The link between infrastructure and industrial development is studied in an OLG model with endogenous skill acquisition. Industrial development is defined as a shift from an imitation‐based, low‐skill economy to an innovation‐based, high‐skill economy, where ideas are produced domestically. Imitation generates knowledge spillovers, which enhance productivity in innovation. Changes in industrial structure are measured by the ratio of the variety of imitation‐ to innovation‐based intermediate goods. The model also distinguishes between basic infrastructure, which helps to promote learning by doing and productivity in imitation activities, and advanced infrastructure, which promotes knowledge networks and innovation. Numerical experiments, based on a parameterized version for a stylized low‐income country, show that changes in the level and composition of public investment in infrastructure may have significant effects on the structure of the labour force and the process of industrial development.

Keywords: endogenous growth, industrial development, infrastructure, skill acquisition

JEL Classification: H54, O14, O41

Suggested Citation

Agenor, Pierre-Richard and Alpaslan, Barış, Infrastructure and Industrial Development with Endogenous Skill Acquisition (October 2018). Bulletin of Economic Research, Vol. 70, Issue 4, pp. 313-334, 2018. Available at SSRN: https://ssrn.com/abstract=3263628 or http://dx.doi.org/10.1111/boer.12166

Pierre-Richard Agenor (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Barış Alpaslan

Ege University ( email )

Bornova
Izmir, 3504
Turkey

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