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Infrastructure and Industrial Development with Endogenous Skill Acquisition

Pierre-Richard Agénor () and Baris Alpaslan

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

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 calibrated version for a 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 labor force and the speed of industrial development.

Pages: 46 pages
Date: 2014
New Economics Papers: this item is included in nep-cse, nep-ino and nep-ure
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Journal Article: INFRASTRUCTURE AND INDUSTRIAL DEVELOPMENT WITH ENDOGENOUS SKILL ACQUISITION (2018) Downloads
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