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Migration, Human capital formation, and growth

This paper will first intuitively explain the model discussed in Chapter 13.4, and see if it differs from the model employed in the reading paper. Second, the way the model is empirically tested will be examined. Third, the predictions of the book’s framework are compared with the enhanced framework conclusions. Final, the main insights of the paper will be presented and will be elaborated.

The model in the book is a combination of the Schumpeter and Gerschenkron model. The model proclaims that productivity growth can only come from implementing the frontier technology or innovating on top of the existing technology. The importance of innovating old technologies depends on a countries distance of the “technological frontier”, the closer one is to the frontier the greater the influence of innovation on growth. Innovation in this model is endogenous, people innovate. Tertiary schooling is an important factor for innovating, since it should increase the ability of a nation to create leading-edge technology. Primary and secondary schooling tend to benefit the ability to implement the current frontier technologies.

Since there are only two ways to grow implementing and innovating, a marginal increase of in the fraction of low skilled workers tend to benefit growth less as the country moves closer to the technological frontier. In the books model both low and high skilled labor can innovate. The only difference between the two is that high skilled labor has a higher elasticity in terms of innovation, and that low skilled labor has a higher elasticity towards implementing. This leads to a situation in which a marginal increase in higher education investments enhances productivity growth all the more the closer the country is from the world technology frontier. And a marginal increase in lower education investment enhances productivity growth all the less the closer the country is from the world technology frontier.