Discussion Papers,
Statistics Norway, Research Department

Abstract: Evidence points to relatively low supply elasticities for workers skilled for research and development (R&D), which can hamper innovation and growth. Increasing the supply of R&D skills will expand an economy's innovative capacity. A simultaneous effect of increased education, which is particularly important for small, open economies, is to raise final goods producers' capacity to absorb cross-border knowledge spillovers. In a calibrated endogenous growth model for Norway, we find that increasing the share of highly educated workers has pronounced absorptive capacity effects that partially crowd out R&D-based innovation. Both innovative and absorptive capacity expansions contribute to higher growth and welfare.

Keywords: Absorptive capacity; Computable general equilibrium model; Endogenous growth; Human capital; Innovation; Research and Development

JEL-codes: O30; O41 June 2012

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