Innovation, human capital and economic growth: international evidence

This thesis empirically examines the roles of innovation and human capital in improving economic growth for a large number of developed and developing countries. It contains three essays. The first essay investigates the effects of R&D intensity and technology transfer on total factor productivity growth. It also examines whether productivity growth depends on human capital and its interaction with distance to the technological frontier. Using several indicators of innovative activity and product variety, the results suggest that R&D intensity has a significant direct and positive effect on productivity growth only in high income OECD countries, whereas the same effect for R&D-based absorptive capacity is only found in developing countries. Moreover, human capital-based absorptive capacity is found to be weakly significant in developing countries. Autonomous technology transfer is found to have a significant effect in stimulating productivity growth in both groups of countries. The second essay studies whether the contribution of human capital to productivity growth depends on its composition and proximity to the technology frontier. Using different levels of human capital data from several sources, the results indicate that the growth-enhancing effects of skilled human capital increase with proximity to the technology frontier only in high and medium income countries. Unskilled human capital contributes more to growth in low income countries, as they move closer to the technology frontier. Female workers with secondary education generate more productivity growth than male workers in low income countries, whereas male workers with tertiary education contribute more to productivity growth than female workers in high and medium income countries. Mature workers with tertiary education are more growth-enhancing for high and medium income countries, whereas younger workers with secondary education are more growth improving for low income countries. The third and final essay examines the joint effects of both the quantity and quality of human capital in improving productivity growth. Using different measures of human capital quantity and quality, the results suggest that the growth effects of educational attainment can be significantly enhanced when the quality of schooling is improved. The magnitude of the joint effect of quantity and quality is found to be dominated by small class size and the performance in cognitive skills tests in science and mathematics. The contribution of the quality-adjusted human capital is found to be stronger in developing countries. Human capital is growth enhancing, but to gain a deeper insight one needs to examine its composition and distinguish between quality and quantity.