Education, human capital, and economic growth

The Akava Works commissioned report “Koulutus, inhimillinen pääoma ja talouskasvu” examines labour productivity, which underpins Finland’s economic well-being, as well as the role of education in productivity growth.

Finland’s economic welfare is fundamentally based on labour productivity. Labour productivity, in turn, depends primarily on the technologies that are developed and adopted in the economy. Investments in buildings, machinery, ICT equipment, and other capital goods are largely outcomes of technological progress. At the end of the causal chain that starts from R&D investment and technology choices lies the country’s structural competitiveness.

The conditions and incentives for developing and adopting technologies are therefore the fundamental drivers of economic growth. These are supported by science, education, and well-functioning markets, with the first two being closely interconnected and forming the central focus of the report.

The role of education in economic growth is often understood too narrowly. Its impact is not limited to increasing the productivity of highly educated workers given existing technologies and capital. More importantly, a highly educated and versatile workforce is essential for developing and implementing new products and production methods. Success in these areas raises productivity across all skill groups and thus increases aggregate economic productivity.

A key conclusion of the report is that labour productivity growth is driven especially by the development and adoption of new technologies. R&D investments and technology choices are decisive for competitiveness.

According to the report, there is substantial untapped potential in the productivity of Finland’s business sector. While Finland was still close to the global productivity frontier in 2008, it has since fallen behind relative to comparable countries such as Sweden, Denmark, and the United States.

The report is authored by Professor Mika Maliranta of the University of Jyväskylä and Director of the Labour Institute for Economic Research (LABORE). It is part of LABORE’s Innovaatio, tuottavuus ja kasvu research programme funded by the Trade Union Foundation. (AI translation)

Publication Information

Maliranta, M. (2023), Koulutus, inhimillinen pääoma ja talouskasvu, Akava Works, Report 1/2023, Akava.