Human Capital Dispersion And Incentives To Innovate
Do policies that alter the allocation of human capital across individuals affect the innovation capacity of an economy? To answer this question, the author extends Romer's (1990) growth model to allow for individual heterogeneity. The author finds that the value of an invention rises with equality. If skills and talents are evenly distributed, inventions are more widely adopted in production and users are willing to bid a higher price. Therefore, more equality is associated with a larger share of the population employed in the business of invention. However, inventors of an equal society are not as creative as those of an unequal one.