Technological Change and Human Capital: Conceptual Framework, Theoretical and Empirical Literature

Abstract

This chapter presents the conceptual and theoretical framework and theoretical and empirical literature that emphasize the positive growth effects of human capital, technological progress and innovation in increasing and sustaining economic growth. We explain that the major difference arise because the exogenous growth theories perceive technical progress and human capital as exogenous variables in growth accounting model, whereas the endogenous growth theory envisages technical progress and human capital as endogenous variables determining the rates and differences of economic growth across countries. We illustrate that the inclusion of human capital and technological change in growth accounting models motivate endogenous growth literature to provide several interesting explanations of the relationship between human capital and technical change. In particular, it stimulates considerable debate about the complementary relationship between human capital and technical progress, skilled biased technical change, the role of technical progress in skill upgrading and the role of skill and improvement in the accumulation of human capital in skill upgrading. Finally, we show the advantages and limitations of several measures of technological change and human capital that have been used in theoretical and empirical literature; some of these measures are used in our analysis.