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Journal of Economic Growth

, Volume 22, Issue 2, pp 193–227 | Cite as

The role of human capital and innovation in economic development: evidence from post-Malthusian Prussia

  • Francesco Cinnirella
  • Jochen Streb
Article

Abstract

The effect of human capital on growth involves multiple channels. On the one hand, an increase in human capital directly affects economic growth by enhancing labor productivity in production. On the other hand, human capital is an important input into R&D and therefore increases labor productivity indirectly by accelerating technological change. In addition, different types of human capital such as basic and higher education or training-on-the-job might play different roles in both production and innovation activities. We merge individual data on valuable patents granted in Prussia in the late nineteenth-century with county-level data on literacy, craftsmanship, secondary schooling, and income tax revenues to explore the complex relationship between various types of human capital, innovation, and income. We find that the Second Industrial Revolution can be seen as a transition period when it comes to the role of human capital. As in the preceding First Industrial Revolution, “useful knowledge” embodied in master craftsmen was related to innovation, especially of independent inventors. As in the subsequent twentieth century, the quality of basic education was associated with both workers’ productivity and firms’ R&D processes. In a final step, we show that literacy had also a negative effect on fertility which increased with innovation. In general, our findings support the notion that the accumulation of basic human capital was crucial for the transition to modern economic growth.

Keywords

Human capital Growth Literacy Innovation Patents Prussia 

JEL Classification

N13 N33 O11 O31 

Supplementary material

10887_2017_9141_MOESM1_ESM.pdf (723 kb)
Supplementary material 1 (pdf 722 KB)
10887_2017_9141_MOESM2_ESM.zip (113 kb)
Supplementary material 2 (zip 113 KB)

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© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.CESifo, CEPR, and CAGEIfo InstituteMunichGermany
  2. 2.University of MannheimMannheimGermany

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