| Summary: | This thesis represents a contribution to the empirical literature on the relation between technological progress and development. In its first chapter, the functional form properties of the relationship between national aggregate R&D expenditure and innovation outputs are investigated. A non-parametric estimation of such relationship demonstrates the existence of important non-linearities. Firstly, a critical mass effect is represented by a delayed onset of positive returns to R&D spending. Secondly, diminishing returns to the accumulation of R&D are uncovered. A disaggregation of R&D by funding source reveals that it is the privately funded R&D component the driving force behind such pattern. The second chapter investigates the channels through which institutional and macroeconomic instability hinder innovative investment undertakings financed by the domestic private sector. The analysis is based on a sample of 44 countries representing all levels of development and considers a number of instability dimensions. The results suggest a negative impact of real, monetary and political instability on the aggregate level of national R&D financed by the business sector. Thus, they highlight the desirability of stable macro-institutional environments in preventing avoidance or abandonment of private innovation undertakings. The third chapter investigates the impact of institutional and macroeconomic instability on the skill premium, in a 69-country panel. The results suggest a negative effect of both types of instability on the skill premium, defined as the ratio of unskilled to skilled wages. An interpretation of such findings in light of the results of chapter two indicates that low skilled wages are associated with lagging R&D investment, as a result of reduced skilled labour productivity and less demand for skilled workers. These findings stress again the importance of stable environments, as a way of preventing the shrinkage of the skill premium, and, thereby, sub-optimal human capital accumulation or brain drain. Overall, the thesis provides empirical evidence regarding the accumulation path of technological development, and how such accumulation may be disrupted in the presence of economic instability.
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