On the Strategic Complementarity of Skilled Workers and Technological Innovation: Which Determines Which?

Abstract

In this document, we analyse the strategic complementarity between technological investment and investment in training by workers. We show that, beyond the importance of the answer to the question about which factor determines which, initial minimal conditions in both factors are required to start a long-run social development process. If these minimums are not met, the economy can become a self-satisfied economy, with a social mediocre performance but, at least in the short run, successful from the individual point of view. We consider that either manager of firms as workers are rational agents who make decisions about their future behaviour, considering the current state of the economy, understanding for such, the percentage of innovative and non-innovative firms in the market and the percentage of skilled and unskilled workers in the labour market. While managers decide the best way to invest, workers decide whether to invest or not in the upgrade or in the development of their skills to face the new challenges posed by technological change. The evolution of the economy is summarized in a complex dynamical system represented by a coupled dynamical system very close to the replicator dynamics considered in evolutionary game theory. In this way, we show that the initial conditions play a crucial role to understand the possibilities of future performance of the economy in each country, and, on the other hand, we analyse the conditions that make possible or necessary the intervention of the government in the economy. JEL Classifications: C72, C73, O11, O55, K42