Skills, labor, and the structural dynamics of the economy

The structural composition of production and demand is constantly changing and there are many interdependent forces that propel the structural dynamics and growth of an economy. The main part of the dissertation analyzes the interplay between endogenous growth and structural change. By embedding growth analysis in a disaggregated sectoral framework a rich theoretical structure is exposed that helps us understand the close interdependence between education, demand, production, and growth. The focus is put on the interplay between skill (human capital), productivity changes, and structural adjustment. Productivity growth rates that differ from the growth in sectoral demands require a continuous process of adjustment—a readjustment both of outputs and of the underlying input mix. Input adaptations—most importantly, changes in the (human) capital endowment—in turn lead to changes in sectoral productivity growth rates.; without capital goods allows us to isolate the most important features of the structural dynamics and lay bare the underlying mechanism we are proposing. The thrust of the analysis does not change in principle with the later introduction of capital goods, but we are able to approximate reality more closely. Not only can we incorporate the idea of technologies being ‘embedded’ in capital goods but also start analyzing international capital flows and the accumulation process. The penultimate chapter changes pace and concerns itself with the introduction of the often neglected institutional environment to economic performance; it examines the impact of different labor law regimes and shows how income insurance in concert with the right employment laws can enhance economic welfare. The final chapter concludes the dissertation and gives recommendations for future research.