Tapping into Talent: Coupling Education and Innovation Policies for Economic Growth.

This article examines how innovation and education policies influence individual career choices and aggregate productivity growth by focusing on the supply and allocation of innovative talent. Using detailed micro-level data from Denmark—including IQ scores, parental income, PhD enrollment, patenting activity, and policy interventions—the authors develop and calibrate an endogenous growth model that incorporates heterogeneous talent, financial constraints, and career preferences. The model captures key empirical findings such as the positive correlation between IQ, parental income, and PhD attainment, as well as the trade-offs involved in expanding PhD slots, which increases researcher quantity but lowers average talent. Policy simulations reveal that education subsidies, by alleviating financial barriers for talented but poor individuals, are more effective than R&D subsidies in boosting long-run innovation and growth, especially in societies with higher income inequality; however, R&D subsidies have stronger short-run effects. The study highlights the complementarity of education and innovation policies, the importance of considering time horizons in policy design, and the role of inequality in shaping optimal policy mixes.