Heterogenous skills, growth and convergence

• We endow agents in a Schumpeterian growth model with heterogenous skills.
• Skills are defined along two dimensions: technological and systemic.
• Technological skills capture the ability to adopt frontier technologies.
• Systemic skills capture the ability to deal with local conditions.
• We find that throughout convergence systemic skills become relatively more important.

This paper analyzes the impact of different individual skills and their economy-wide distribution among heterogenous entrepreneurs on a country's catching up-process to the world technology frontier (WTF). Highly skilled entrepreneurs qualify as either technological specialists or as broadly skilled systemic entrepreneurs. Governmental policy may address individual skills or the aggregate composition of skills in society and may be interpreted as education policy. The effectiveness of alternative growth-promoting policies is shown to depend on the relationship between a country's state of development and the prevailing composition of entrepreneurs. Countries far from the WTF benefit from increasing the share of technological specialists, whereas countries close to the WTF benefit from increasing the share of broadly skilled systemic entrepreneurs.