Human Capital, Ideas, and Economic Growth

This paper presents a simple model of human capital, ideas, and economic growth that integrates contributions from several different strands of the growth literature. The model generates a regression specification that is very similar to that employed by Mankiw, Romer and Weil (1992), but the economics underlying the specification is very different. In particular, the model emphasizes the importance of ideas and technology transfer in addition to capital accumulation. The model suggests that cross-country data on educational attainment is most appropriately interpreted from the macro standpoint as something like an investment rate rather than as a capital stock. Finally, this setup helps to resolve a puzzle recently highlighted by the empirical growth literature concerning human capital and economic growth by following Bils and Klenow (1996) in emphasizing a relationship between wages and educational attainment that is consistent with Mincerian wage regressions. I would like to thank the Center for Economic Policy Research at Stanford and the National Science Foundation (SBR-9510916) for financial support. Prepared for the VIII Villa Mondragone International Economic Seminar on Finance, Research, Education, and Growth in Rome on June 25-27, 1996. Human Capital, Ideas, and Economic Growth 1