Technological Complexity and Economic Growth

The last fifty years have witnessed large secular increases in educational attainment and R&D intensity. The fact that these trends have not stimulated more rapid income growth has been a persistent puzzle for growth theorists. We construct a model of endogenous economic growth in which income growth, R&D intensity, and educational attainment depend on the complexity of new technologies. An increase in complexity that makes passive learning more difficult, induces increases in R&D and education, alongside a decline in income growth. Our explanation also predicts a concurrent rise in the skill premium.