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Physical And Human Capital Accumulation And The Evolution Of Income And Inequality

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  • GUIDO BALDI

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    (German Institute for Economic Research, Germany)

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    Abstract

    We study how financial and educational institutions affect the evolution of income and income inequality in an overlapping generations model with heterogenous agents. While the literature mostly focuses on either physical or human capital, we make an attempt to study the joint evolution of these variables. In our model, we find that better educational institutions increase income of the individuals and are associated with lower income inequality. Better financial institutions also foster economic growth, but are associated with higher income inequality. Our model also demonstrates that focusing on aggregate measures of financial and educational institutions provides misleading results if one neglects the possibility of unequal access to these institutions.

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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 38 (2013)
    Issue (Month): 3 (September)
    Pages: 57-83

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    Handle: RePEc:jed:journl:v:38:y:2013:i:3:p:57-83

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    Related research

    Keywords: Economic Development; Income Distribution; Institutions and Growth;

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    References

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    1. Daniel Mejía & Marc St-Pierre, . "Unequal Opportunities and Human Capital Formation," Borradores de Economia 415, Banco de la Republica de Colombia.
    2. Oded Galor & Omer Moav, 2004. "From Physical to Human Capital Accumulation: Inequality and the Process of Development," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1001-1026.
    3. Loesse Jacques Esso, 2010. "Re-Examining The Finance-Growth Nexus: Structural Break, Threshold Cointegration And Causality Evidence From The Ecowas," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(3), pages 57-79, September.
    4. Thomas Cornelissen & Uwe Jirjahn & Georgi Tsertsvadze, 2008. "Parental Background and Earnings: German Evidence on Direct and Indirect Relationship," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 228(5+6), pages 554-572, December.
    5. Glomm, Gerhard & Ravikumar, B., 2003. "Public education and income inequality," European Journal of Political Economy, Elsevier, vol. 19(2), pages 289-300, June.
    6. Kunieda, Takuma, 2008. "Financial Development, Capital Flow, and Income Differences between Countries," MPRA Paper 11342, University Library of Munich, Germany.
    7. Claessens, Stijn & Perotti, Enrico, 2007. "Finance and inequality: Channels and evidence," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 748-773, December.
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    Cited by:
    1. Baldi, Guido & Sadovskis, Vairis & Šipilova, Viktorija, 2014. "Economic and Employment Effects of Microloans in a Transition Country," MPRA Paper 52736, University Library of Munich, Germany.

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