From Which Side to the Steady State of the Augmented Solow Model? The Role of Country-Specific Total Factor Productivity Growth Rates

The human capital-augmented Solow model (Mankiw et al., 1992) has been criticized by Cho and Graham (1996) by stating that half of all countries converge to their steady state from above, i.e. from income levels above those obtained in their steady state. This is clearly at odds with the general idea that countries approach their steady state from a backward position. In this paper we will argue that this result is primarily due to the assumption of an identical exogenous rate of technological progress for all countries. Once different rates of technological progress are introduced into the model, the number of countries approaching their steady state from above is reduced to a number more in line with what the augmented Solow model would predict. However, for a sample consisting of 98 non-oil countries, the assumption of constant returns to scale has to be rejected. For the non-oil sample our analysis thus both supports and challenges the human capital-augmented Solow model. For a more limited sample consisting of 22 OECD countries, the results clearly support the augmented Solow model by both reducing the number of countries converging from above their steady state to zero and by accepting the assumption of constant returns to scale.mathematical economics and econometrics ;

Technology, Knowledge Spillovers and Changes in Skill Structure

This paper investigates and compares the changes in skill structure in six OECD countries (Finland, France, Germany, Japan, the United Kingdom and the United States) in the period 1975-1995 using new OECD data on employment by skill level and type. For all countries evidence is found that technical change is skill-biased in the sense that it favors high-skilled labor. In particular white-collar high-skilled workers have profited from recent technical change. However, rather than employees literally working on R&D it are workers who supervise and use the implemented parts of the advancements of R&D that profit from increased R&D efforts. In addition, the results are extended by stressing the importance of knowledge spillovers on changes in employment shares between high-skilled and low-skilled workers.labour economics ;

The Diffusion of Informal Knowledge and Innovation Performance: A sectoral approach

This paper tries to quantify the effect of diffusion of informal knowledge on the innovative performance of European firms using data derived from the 3rd Community Innovation Survey. When firms are asked whether or not they have introduced new products or processes, they were also asked to which degree such innovations were developed in-house. These degrees were captured by the CIS variables InPdtW and InPcsW. These variables ranged from 1 (Mainly done by the firm) to 3 (Mainly done by other enterprises). The focus of this paper is to investigate the impact of diffusion of informal knowledge. We combine the previous variables with another variable which reflects firms that were not doing any formal collaboration with other institutions. If an innovative firm has no formal collaboration arrangements and the innovation has not been done mainly by the firm, then diffusion of informal knowledge is considered to be the main driver of the innovation. The idea is that informal channels are accessible to all firms. This paper tries to quantify the impact of such flows of knowledge on firms' innovation performance. To do this, a two step procedure is followed: -In a first step, a latent variable for diffusion of informal knowledge is defined and estimated based on firms' characteristics. -In a second step, the latent diffusion variable is introduced as a regressor in a probit/tobit model.Knowledge flows, innovation, dynamic equations, sectoral innovation, CIS

Knowledge Spillovers and Wage Inequality: An Empirical Investigation of Knowledge-Skill Complementarity

This paper examines the importance of knowledge-skill complementarity in the process of contemporary economic growth. By analyzing Dutch manufacturing and carrying out an extensive spillover and wage inequality analysis, it is shown that knowledge-intensive sectors pay their high-skilled workers a relatively higher wage in the form of a wage premium, which is defined as the sector bias of technical change.research and development ;

Trends in Growth Convergence and Divergence and Changes in Technological Access and Capabilities

This paper goes into detail in the pattern of growth over the last thirty to forty years at the world level. A model is developed in which different aspects of technological change and their influence on growth will be outlined. This model is used in estimations for cross-country OECD-samples of 1973-1996 growth paths, as well as in panel databases for yearly growth rates over the 1973-1996 period. In addition, an analytical technique is developed which identifies different empirical sources for specific convergence or divergence trends within the OECD area. Moreover, we show that traditional factors are only partially able to explain the recent divergence relative to the US. Hence, we introduce ‘new’ factors explaining this trend.economics of technology ;

An assessment of the Innovation Union Scoreboard as a tool to analyse national innovation capacities: The case of Switzerland

This article investigates the Innovation Union Scoreboard (IUS) as a tool to carry out case studies about national innovation capacities in the case of given countries. It clarifies what this statistical framework can offer in terms of information and insights on strengths and weaknesses of a given country relative to the other countries which are also involved in this statistical exercise. The investigation is carried out through the case study of Switzerland; a country that is leading the IUS ranking for many years. The approach will therefore start with the full analysis of the IUS results for Switzerland. Then other statistical evidence as well as qualitative insights will be added to the discussion to identify what really matters to explain success and the potential weaknesses the Swiss policy should care about. The conclusion is that if the IUS can be considered as an important tool to inform innovation policies, it should not be applied in an isolated manner or without relying on other types of indicators and information on the system considere

Skill-Biased Technological Change in an Endogenous Growth Model

When new technologies are introduced in the production process or when technological change is incorporated in an economic model, it is agreed upon that this reduces the demand for low-skilled labour relative to the demand for high-skilled labour. In general the rationale for this argument is that high-skilled workers and capital are complements, whereas high-skilled labour and low-skilled labour are substitutes, e.g. many routine assembly activities are replaced. In addition, it is acknowledged that high-skilled workers adapt more easily to changing technologies than their low-skilled colleagues. Finally, the computer revolution increases the productivity of high-skilled workers more than the productivity of low-skilled workers, leading to wage dispersion. This paper develops a model of endogenous growth with heterogenous labour, which leads to skill-biased technological change and wage dispersion. In order to do so, we discuss the changing skills profile in terms of a dynamic model.labour economics ;

Skill-Biased Technical Change: On Endogenous Growth, Wage Inequality and Government Intervention

This paper builds a general equilibrium model of endogenous growth outside the representativeagent framework to show that when individuals are heterogenous, persistent inequality will bethe result of economic growth. Individuals are assumed to be born with different abilities, whichwill lead to a steady state growth path of biased technical change towards individuals with ahigher ability. The problem of inequality as a result of skill-biased technical change is partiallysolved by allowing for government intervention. Intervention is shown to solve the problem tosuch a degree that particular subsidies and taxes on labor income are efficient.economic development an growth ;