The Skilled 1% and Economic Growth

In its “Free Exchange” blog, the Economist recently discussed a paper published by Mara Squicciarini of Katholieke Universiteit Leuven and Nico Voigtländer of the University of California, Los Angeles that looked at how the ability of an economy to innovate may depend upon not just education levels in that economy in general, but a concentration of a particular kind of education:STEM

The authors reckon that “upper-tail knowledge” rather than “average human capital” is what drives industrialisation. This matters presumably because while worker skills, such as literacy and primary education, boost productivity by utilising existing technologies, it is the skills held by top engineers and entrepreneurs that enables a society to innovate and foster the type of rapid technological progress that characterised the industrial revolution. Since education and literacy are two of the most common measures used in the academic literature this distinction would, if true, help explain why most previous studies have tried but failed to find a strong link between growth and human capital during the transition to the new manufacturing processes of the 18th and 19th centuries.

They are looking at economic conditions that are 200 to 300 years in the past.  Nonetheless, their work suggests that current calls to close the “skills gap” in the economy won’t necessarily guarantee that the US economy will be able to sustain necessary levels of innovation to maintain or raise the nation’s standard of living.  The full story is here.

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