Knowledge spillovers and economic growth
Since the seminal work of Lucas (1988), uncompensated knowledge spillovers have been shown to play a critical role in the process of economic development. However, the standard Lucas model studies human capital accumulation in narrow settings with one industry and a closed-economy. This dissertation attempts to study the development process in richer settings. In particular, various types of spillovers are examined. Our work shows that intra-industry spillovers promote economic growth but inter-industry spillovers are more complex. Specifically, spillovers from human capital across sectors may lead to lower overall growth of consumption. In an open economy setting, the growth rates of human capital critically depend on variation across countries in educational productivity. In particular, if the growth rate of human capital is stronger abroad than domestically, human capital accumulation will decline at home. However, the magnitude of the problem depends on differences in regional external economies. In fact, such differences might actually cause the stock of human capital to decline over time. Our work also demonstrates that external economies from human capital have important implications for international trade, which provides additional linkages for economic activity across countries. Namely, increased spillovers at home will lead to a deterioration in the domestic terms of trade. Consequently, policies designed to affect the diffusion of knowledge will impact regional economic activity.