1. Innovative and absorptive capacity effects of education in a small, open economy
- Author:
- Taran Fæhn and Brita Bye
- Publication Date:
- 12-2012
- Content Type:
- Working Paper
- Institution:
- Norwegian Institute of International Affairs
- Abstract:
- Evidence points to relatively low supply elasticities for workers skilled for research and development (R), which can hamper innovation and growth. Increasing the supply of R 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 cross-border 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 innovation. Both innovative and absorptive capacity expansions contribute to higher growth and welfare.
- Topic:
- Development, Education, Human Welfare, Markets, and Labor Issues
- Political Geography:
- Europe