This project has two parts. The first deals with innovation, the second with human capital accumulation of a conventional sort. Growth in the most advanced economies is fueled by the development of new products and processes, and growth in the developing world by successful adoption of existing technologies. The first part of the research is a more systematic examination of the factors that determine the aggregate level of innovative activity in each setting. Chief among these are the degree of substitutability among products and the nature of competition in the product market. A key question is under what circumstances a less developed economy will tend to catch up to a more advanced one. During the 1980's real wages in the U.S. rose for professional workers and stagnated or fell for other groups. The second part of the research is directed toward explaining the dynamics of the relative wages of skilled and unskilled labor as an economy develops. Trade between economies with different mixes of skilled and unskilled labor, and the incentives for skilled and unskilled labor to migrate from less to more developed economies will also be examined.
