The Spillover Effects of Innovative Ideas on Human Capital

Barış Alpaslan, Abdilahi Ali

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)
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Abstract

This paper extends a two-period Overlapping Generations model of endogenous growth where the interactions between public infrastructure and human capital with 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 emphasise 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.
Original languageEnglish
Pages (from-to)333-360
Number of pages28
JournalReview of Development Economics
Volume22
Issue number1
Early online date29 Aug 2017
DOIs
Publication statusPublished - 28 Feb 2018

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