Knowledge creation and technology difusion: a framework to understand economic growth

The most influential explanations of economic growth along the past five decades rely on two main items: human capital accumulation and the dissemination of knowledge/technological diffusion. These items traditionally appear as separate growth sources. In this paper an integrated perspective is adopted. We begin by building a growth model where two goals regarding technological achievements are considered; economic agents simultaneously want to expand the theoretical knowledge frontier and to reduce the gap between ready-to-use techniques and potentially available knowledge. Considering an objective function that captures the two pointed goals, one develops an intertemporal optimization setup concerning a two sector scenario. The first sector adapts existent technology to productive uses, while the second is an education sector. In this way, we can study the close relationship between technical progress and human capital generation decisions under an intertemporal perspective.