The Role of Human Capital and Population Growth in R&D-Based Models of Economic Growth

Human capital accumulation is introduced into a growth model with R&D-driven expansion in variety and quality and knowledge spillovers from both research activities. Economic growth is not longer uniquely tied to population growth as previous growth models without scale effects suggest. The model predicts that economic growth depends positively on the rate of human capital accumulation and positively or negatively on population growth. It is therefore harder to reject by empirical evidence. Long-run growth is compatible with a stable population. As in previous studies the market generates the optimal growth rate but possibly a suboptimal level of the growth path. I calibrate the model with U.S. data and investigate whether the market provides too little or too much R&D.