Abstract

This paper presents a model of development in which skilled labor is an input in technology adoption. The model combines Nelson and Phelps (1966) type technology dynamics with a growth model in which intermediate goods are used to produce a nal good. The intermediate good producers hire skilled labor to increase their productivity by adopting techniques from an exogenously evolving stock of world knowledge. I solve for the stationary equilibrium and derive analytic expressions for steady state income level and wage premium. In a quantitative exercise, I calibrate the model and compare its predictions with data. The model successfully accounts for cross-country income dierences

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