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The Human Capital Constraint: Of Increasing Returns, Education Choice and Coordination Failure

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Author Info
Shekhar Aiyar (International Monetary Fund)

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Abstract

If technological innovations in the North can be costlessly imitated by educated workers in the South, and if education decisions are endogenous, why aren't all countries well-educated and rich? This paper explores a possible answer: if technologically advanced sectors, operating under increasing returns to scale, need a minimum pool of educated workers to commence production, then coordination failure can arise in the choice of education. A simple two-sector model is shown to yield multiple equilibria: countries that perform well educationally and adopt technology successfully can co-exist with countries that fail in both endeavors.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal The B.E. Journal of Macroeconomics.

Volume (Year): topics.3 (2003)
Issue (Month): 1 ()
Pages:
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Handle: RePEc:bpj:bejmac:v:topics.3:y:2003:i:1:n:2

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Related research
Keywords: Increasing Returns; Education Choice; Coordination Failure;

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Find related papers by JEL classification:
I20 - Health, Education, and Welfare - - Education - - - General
I28 - Health, Education, and Welfare - - Education - - - Government Policy
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
O30 - Economic Development, Technological Change, and Growth - - Technological Change - - - General

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