Human Capital Accumulation and Imbalance Effects in R&D-based Growth Models

This paper develops a multi-sectoral endogenous growth model, that is able to reproduce the most important features of an “ICT (Information and Communication Technologies)-based economy”, in which a central role is played by human capital accumulation. Indeed, one of the aspects of the so-called “New Economy” (in which ICT are a key element) is that human capital can be of great importance, since education is crucial in acquiring the knowledge necessary to use the new technologies, and at the same time an increase in these technologies makes it easier to accumulate human capital. The model presented considers discrete time with infinite horizon, endogenous growth, horizontal differentiation and human capital accumulation. In particular, the essential aspects of an ICT economy that it takes into account are the embodied nature of technological progress (typically the innovations that are present in the ICT sector are embodied in the new capital goods), the central role of R&D (since the amount of resources devoted to it is high, particularly in the USA) and the link between innovation and market power (because ICT markets are non-competitive), in addition to the role of human capital accumulation. The model builds on Romer (1990) and Boucekkine and de la Croix (2003) for the general structure, but departs from them in some respects. In particular, the R&D sector assumes the “lab-equipment” specification (Rivera-Batiz and Romer, 1991), furthermore a human capital accumulation activity of the kind introduced by Lucas (1988) is considered.