The past and future of knowledge-based growth
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This paper consolidates two previously disconnected literatures. It integrates R&D-based innovations into a unified growth framework with micro-founded fertility and schooling behavior. The theory suggests a refined view on the human factor in productivity growth. It helps to explain the historical emergence of R&D-based growth and the subsequent emergence of mass education and the demographic transition. The model predicts that the erstwhile positive correlation between population growth and innovative activity turns negative during economic development. This “population-productivity reversal” explains why innovative modern economies are usually characterized by low or negative population growth. Because innovations in modern economies are based on the education of the workforce, the medium-run prospects for future economic growth—when fertility is going to be below replacement level in virtually all developed countries—are better than suggested by conventional R&D-based growth theories.
KeywordsR&D Productivity Fertility Human capital Demographic transition
JEL ClassificationJ13 J24 O10 O30 O40
We would like to thank Carl-Johan Dalgaard, Oded Galor, Franz Hof, Peter Howitt, Dirk Krueger, and Ken Tabata as well as five anonymous referees for helpful comments.
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