As the Draghi report shows, Europe needs to undergo a fundamental transformation in order to escape its 'mid-technology trap'. Mainstream economic theory offers little guidance on how to achieve this. A critical review of neoclassical growth theory shows that in these models, growth and...

This paper studies how individuals sort into entrepreneurship and invention-related occupations and how their interactions shape innovation and economic growth. We develop an endogenous growth model in which occupational sorting jointly determines the supply of R&D talent and entrepreneurs'...