The spillover effects of innovative ideas on human capital

Alpaslan, B; Ali, A

Abstract

This paper extends a two-period overlapping generations model of endogenous growth where the interactions between public infrastructure and human capital with research and development (R&D) activities and growth are studied. The paper makes two important contributions. First, it accounts for the spillover effect of the stock of ideas on learning, which in turn promotes the production of innovative technologies. In doing so, it brings to the fore a two-way interaction between human capital and innovation. The paper then applies various econometric methods which confirm the above theoretical thesis. Second, the solutions of the model emphasize the important role public spending on infrastructure, human capital and R&D can play in promoting economic growth. However, the findings also show that trade-offs in the allocation of public spending may inevitably emerge. In particular, investment in public infrastructure at the expense of spending on R&D is less likely to succeed in promoting economic growth, whereas it may be more effective to foster growth through an offsetting cut in another productive component, namely, education. In light of these potential trade-offs, governments in low-income countries need to use their limited budgets as part of holistic measures in order to achieve efficient outcomes.

Citation

Alpaslan, B., & Ali, A. (2017). The spillover effects of innovative ideas on human capital. Review of Development Economics, 22(1), 333-360. https://doi.org/10.1111/rode.12344

• Journal Article Type: Article
• Online Publication Date: Aug 29, 2017
• Publication Date: Aug 29, 2017
• Deposit Date: Jan 19, 2018
• Journal: Review of Development Economics
• Print ISSN: 1363-6669
• Publisher: Wiley
• Volume: 22
• Issue: 1
• Pages: 333-360
• DOI: https://doi.org/10.1111/rode.12344
• Publisher URL: http://dx.doi.org/10.1111/rode.12344
• Related Public URLs: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9361; https://cama.crawford.anu.edu.au/publication/cama-working-paper-series/8406/spillover-effects-innovative-ideas-human-capital