Innovative and absorptive capacity effects of education in a small open economy
Working paper
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http://hdl.handle.net/11250/2628149Utgivelsesdato
2012-06Metadata
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- Discussion Papers [1002]
Sammendrag
Evidence points to relatively low supply elasticities for workers skilled for research and development (R&D), which can hamper innovation and growth. Increasing the supply of R&D skills will expand an economy's innovative capacity. A simultaneous effect of increased education, which is particularly important for small, open economies, is to raise final goods producers’ capacity to absorb crossborder knowledge spillovers. In a calibrated endogenous growth model for Norway, we find that increasing the share of highly educated workers has pronounced absorptive capacity effects that partially crowd out R&D-based innovation. Both innovative and absorptive capacity expansions contribute to higher growth and welfare.