Human Capital Composition, Growth and Development in an R&D Endogenous Growth Model∗

The effect of human capital composition on growth and development has been somewhat neglected in economic literature. However, evidence has suggested the importance of engineering and technical skills to economic growth and international organizations had suggested their shortage in developed countries. Using a standard increasing variety endogenous growth model, we propose various measures of this composition. We show that human capital composition matters to growth and development, that the decentralized equilibrium leads to less investment in high-techs than the optimum and that the tendency to under-invest in R&D is expanded when human capital composition ∗I am grateful to the Fundação para a Ciência e Tecnologia for financial support during the second year of my Ph.D. program (PRAXIS XXI / BD / 21485 / 99). I am grateful to my advisors Ana Balcão Reis and José Tavares for extensive discussion and suggestions and to John Huffstot for text revision. I also gratefully acknowledge participants of the Informal Research Workshop at the Faculdade de Economia, Universidade Nova de Lisboa, Research Seminar at Escola de Economia e Gestão, Universidade do Minho and XXVII Simposio de Analisis Economico, Salamanca and Carlos Osório for discussion and many comments and suggestions. This paper has circulated in a previous version under the title “Human Capital, Growth and Development: an old Theory and a new Puzzle”. The usual disclaimer applies. †Doctoral candidate at Faculdade de Economia, Universidade Nova de Lisboa, and Teaching assistant at Departamento de Gestão e Economia, Universidade da Beira Interior.