1996/03/01 by Stephen Redding, Stephen J. Redding · 3 citations
Economics, Econometrics and Finance · #Economic Growth and Productivity #Fiscal Policy and Economic Growth #Labor market dynamics and wage inequality
paper · doi:10.2307/2235260
This paper investigates the relationship between investments in human capital and R&D in a model of endogenous growth. Both forms of investment exhibit pecuniary externalities and are, as a result, strategic complements. Multiple equilibria may occur for intermediate parameter values and the present analysis may be seen as providing a theoretical rationalization for the idea that an economy may become trapped in a 'low-skills' equilibrium, characterized by a poorly trained workforce and low product quality. In the presence of multiple equilibria, there may be a welfare-improving role for government policy in coordinating expectations. Copyright 1996 by Royal Economic Society.