Essays on economic growth and development

This thesis examines theoretically and quantitatively the role of: (a) skill-biased technological change; and (b) endogenous fiscal policy, in economic development.; Chapter 2 studies the adoption of general-purpose technologies (GPTs) that require workers to acquire new skill vintages. The focus is on the case that new skill vintages exhibit higher elasticity of labor earnings with respect to training (skill bias). A micro structure consistent with labor-literature wage regressions is developed in order to study skill-specific choices in this technical-change environment. It is shown that training-profitability-maximizing households place personal-resource thresholds below which they do not pursue specific skills for the new technology, even without credit-market failures. This household behavior is proposed as a strong factor in determining development stages, threshold effects and multiple-growth regimes. The analyzed micro structure is incorporated into a general-equilibrium dynamic framework in order to study the diffusion process of skill-biased GPTs and the transitional dynamics of the macroeconomy.; Chapter 3 proposes that the model provides an explanation for the observed phenomenon that during 1960–90, the middle-income countries exhibited the highest variation in growth rates, educational investments and the highest within-country educational inequality, based on these countries experiencing skill-biased transitions during their industrialization. Evidence is presented in support of this explanation, testing at the same time a key dynamic implication of the model: a more egalitarian initial income/wealth distribution is associated with significantly faster future changes in the fraction of skilled population, especially for the middle-income countries in 1960–90. The evidence is largely based on regression-tree classification analysis.; Chapter 4 deals with the following questions: How do household preferences over public consumption affect the making of time-consistent fiscal policies? What are the effects of such policies on the macroeconomy? These questions are addressed within a neoclassical growth model, arguing that time-consistent policies capture well the process of policy making in the real world. Preferences over public consumption are estimated for high-income OECD countries and the model is simulated according to these estimations. The main quantitative implication of the model is that different household preferences over public consumption are reflected strongly in the making of policies and can satisfactorily explain cross-country differences in the trajectories of the public-consumption share. However, for cases where the steady-state size of government is the same in the long rim, while preference differences have a large quantitative impact on public and private consumption trajectories, they do not trigger significant quantitative differences in the savings rate and income transitional paths. Moreover, for reasonable values of the elasticity of intertemporal substitution, the model with endogenous policy does not exhibit a large and rapid drop in the savings rate as the economy approaches the steady state from below, correcting a counterfactual quantitative property of the standard neoclassical model.