High-skilled workers, the share of the high-tech sector and economic growth in European countries

What is it about?

Over more than a decade, European politicians have emphasized the need to increase the share of the high-tech sector as part of the European growth strategy. By means of an endogenous growth model, we study a transitional-dynamics mechanism that is consistent with the changes in the shares of the high- versus the low-tech sectors found in recent European data under the hypothesis of a positive shock in the proportion of high-skilled labor. A calibration exercise suggests that the model is able to account for up to from 50 to about 100 percent of the increase in the share of the high-tech sector observed in the data from 1995 to 2007. However, the model predicts that the dynamics of the share of the high-tech sector has no significant impact on the dynamics of the economic growth rate.

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