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The role of rents to human capital in economic development

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  • Saint-Paul, Gilles

Abstract

In an overlapping generations model, rents to human capital play a key role in increasing savings. In the absence of such rents, the return to human capital is entirely appropriated by the old and accumulation is entirely determined by the income to fixed factors. If rents are introduced by setting a ceiling on human capital accumulation, the economy may achieve a larger income level, even though the ceiling reduces the economy's feasibility set. Threshold effects and multiple steady states arise because rents to human capital are self perpetuating. Inequality in abilities may be good for growth because it allows inframarginal workers to earn rents on their human capital, which then increase savings. Public education is also good for growth because it gives the young property rights over their own human capital, which are thus equivalent to rents.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 53 (1997)
Issue (Month): 2 (August)
Pages: 229-249

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Handle: RePEc:eee:deveco:v:53:y:1997:i:2:p:229-249

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  1. Jappelli, Tullio & Pagano, Marco, 1994. "Saving, Growth, and Liquidity Constraints," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 83-109, February.
  2. Larry E. Jones & Rodolfo E. Manuelli, 1990. "Finite Lifetimes and Growth," NBER Working Papers 3469, National Bureau of Economic Research, Inc.
  3. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  4. Marvin Goodfriend & John McDermott, 1994. "Early development," Working Paper 94-02, Federal Reserve Bank of Richmond.
  5. Barro, Robert J., 1974. "Are Government Bonds Net Wealth?," Scholarly Articles 3451399, Harvard University Department of Economics.
  6. Saint-Paul, G. & Verdier, T., 1991. "Education, Democracy and growth," DELTA Working Papers 91-27, DELTA (Ecole normale supérieure).
  7. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
  8. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
  9. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  10. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  11. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  12. Buiter, Willem H, 1991. "Saving and Endogenous Growth: A Survey of Theory and Policy," CEPR Discussion Papers 606, C.E.P.R. Discussion Papers.
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Cited by:
  1. Saint-Paul, Gilles, 1996. "Unemployment and increasing private returns to human capital," Journal of Public Economics, Elsevier, vol. 61(1), pages 1-20, July.
  2. Amparo Castello-Climent & Abhiroop Mukhopadhyay, 2010. "Mass education or a minority well educated elite in the process of development: The case of India," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 10-08, Indian Statistical Institute, New Delhi, India.

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