Infrastructure and Industrial Development With Endogenous Skill Acquisition

Abstract

The link between infrastructure and industrial development is studied in an OLG model with endogenous skill acquisition. Industrial development is defined as a shift from an imitation‐based, low‐skill economy to an innovation‐based, high‐skill economy, where ideas are produced domestically. Imitation generates knowledge spillovers, which enhance productivity in innovation. Changes in industrial structure are measured by the ratio of the variety of imitation‐ to innovation‐based intermediate goods. The model also distinguishes between basic infrastructure, which helps to promote learning by doing and productivity in imitation activities, and advanced infrastructure, which promotes knowledge networks and innovation. Numerical experiments, based on a parameterized version for a stylized low‐income country, show that changes in the level and composition of public investment in infrastructure may have significant effects on the structure of the labour force and the process of industrial development.

Caught in the Middle? The Economics of Middle‐income Traps

“…This process is also consistent with the analysis in Perez‐Sebastian (), Glass (), Agénor and Dinh (), and Agénor and Alpaslan (), where imitation, due to large externalities associated with technology diffusion, is the main source of productivity growth in the early stages of development, whereas broad‐based innovation—defined as the application of new ideas, technologies, or processes to productive activities—becomes the main engine of growth as the economy approaches the world technology frontier. While imitation is intensive in low‐skilled labor, innovation requires only skilled labor, as for instance in Vandenbussche et al .…”

“…8 More generally, as documented by Dabla-Norris et al (2013), the reallocation of labor from low-productivity agriculture to high-productivity sectors (initially manufacturing and subsequently services) was a primary channel through which today's advanced economies increased their living standards. 9 This process is also consistent with the analysis in Perez-Sebastian (2007), Glass (2010), Agénor and Dinh (2013), and Agénor and Alpaslan (2014), where imitation, due to large externalities associated with technology diffusion, is the main source of productivity growth in the early stages of development, whereas broad-based innovation-defined as the application of new ideas, technologies, or processes to productive activities-becomes the main engine of growth as the economy approaches the world technology frontier. While imitation is intensive in low-skilled labor, innovation requires only skilled labor, as for instance in Vandenbussche et al (2006).…”

Modelling the dynamics of corruption and unemployment with heterogeneous labour

“…which uses skilled workers, and depends on the public-private capital ratio (Agénor and Alpaslan, 2014) and the stock of designs (Jones, 2005). To eliminate scale e¤ects, it is the ratio of workers to total population that is speci…ed in the production function.…”

Gender Gaps in the Labor Market and Economic Growth

“…Equation(3)is assumed to hold as a strict inequality for individual  with the highest ability, that is,   = 1, otherwise nobody of gender type  would choose to become skilled. In principle, the decision to acquire skills should depend on expected utility under alternative occupations, as inAgénor and Alpaslan (2018) for instance. However, in the present setting, the resulting condition cannot be solved explicitly for the threshold level of ability.…”