Abstract
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 rationalisation for the idea that an economy may become trapped in a 'low-skills' equilibrium, characterised 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 co-ordinating expectations.
Original language | English (US) |
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Pages (from-to) | 458-470 |
Number of pages | 13 |
Journal | Economic Journal |
Volume | 106 |
Issue number | 435 |
DOIs | |
State | Published - Mar 1996 |
All Science Journal Classification (ASJC) codes
- Economics and Econometrics