The Political Economy of Skilled Workers and Innovation

Abstract

This chapter examines the link between skilled workers and innovation, and the political economy that affects this relationship. With a focus on the current state of research in this area, the chapter first summarizes the new evidence on the connections between skilled labor and innovation relating to knowledge development, entrepreneurship, teams, diversity, and brain drain. The second section discusses the possibility for reverse causalitynamely, that innovation can be a driver of the demand for high-skilled labor. In the following section, connections are made between public policies related to education systems, immigration, patent systems, intellectual property, public-private partnerships and amenities, and the possible effect on the level of skilled workers in various labor markets. The recent research is largely focused on the USA and OECD countries, and empirical evidence is provided using current data that corroborates the results of many of the reviewed studies. The final section lists resources for researchers aiming to move forward on the frontier of this line of research.

The Over-Education Wage Penalty Among Phd Holders: A European Perspective

“…Indeed, individuals may reconsider their investment in education, fearing that the time and effort spent on obtaining a PhD is not sufficiently rewarded (Gaeta et al, 2022). This is a key issue as PhD holders are generally considered to play a strategic role in the expansion of the so-called 'knowledge economy' (Bansak et al, 2021;Ermini et al, 2017). Moreover, from a public finance perspective, the fact that many doctorate holders end up in jobs for which they are genuinely over-educated means that significant resources are wasted, especially as the cost of doctoral training is high and the share of public funding spent on doctorate holders is large (Caroleo and Pastore, 2018).…”

“…Doctoral education is at the heart of the innovation process and a key driver of economic growth (Bansak et al, 2021;OECD, 2016). Through research, doctoral graduates produce the most advanced scientific knowledge, which is then used by firms to strengthen their productive capacity (Herrera et al, 2010).…”