paper No. 01-035
In this paper, we develop a model of technology adoption and economic growth in
which households optimally obtain either a concept-based, “general” education or a skill-specific,
“vocational” education. General education is more costly to obtain, but reduces
the loss of a worker’s task-specific productivity whenever a new technology is incorporated
into production. Firms weigh the cost of adopting and operating new technologies
against increased revenues and optimally choose the level of adoption. Conditional on
their education, households then choose between working in the technology-adopting
sector and the non-adopting sector. We show that an economy whose policies favor
vocational education will grow slower in equilibrium than one that favors general education.
Moreover, the gap between their growth rates will increase with the growth rate of
Skill-specifc rather than General Education:
A Reason for Slow European Growth?
Dirk Krueger and Krishna B. Kumar
Our theory suggests that while European education policies that favored specialized,
vocational education might have worked well during the 60s and 70s when available
technologies changed slowly, it may have contributed to slow growth and may have
increased the growth gap relative to the US in the information age of the 80s and 90s
when new technologies emerged at a more rapid pace.
Download this paper (PDF)