Should a Country Invest more in Human or Physical Capital? A Two-Sector Endogenous Growth Approach
AbstractShould a country invest more in human or physical capital? The present paper addresses this issue, considering the impact of different factor intensities between sectors on both optimal human and physical capital accumulation. Using a two-sector overlapping generations setting with endogenous growth driven by human capital accumulation, we prove that relative factor intensity between sectors drastically shapes the welfare analysis: two laissez-faire economies with the same global capital share may generate physical capital excess or scarcity, with respect to the optimum. The model for the Japanese economy, that experienced a factor intensity reversal after the oil shock, is then calibrated. It is shown that Japan invested relatively too much in human capital before 1975, but has not invested enough since 1990.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1330.
Length: 23 pages
Date of creation: May 2013
Date of revision: May 2013
Endogenous growth; social optimum; two-sector model; factor intensity differential;
Other versions of this item:
- Marion Davin & Karine Gente & Carine Nourry, 2013. "Should a Country Invest more in Human or Physical Capital? A Two-Sector Endogenous Growth Approach," Working Papers halshs-00822391, HAL.
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eric W. Bond & Ping Wang & Chong K. Yip, 1993.
"A general two-sector model of endogenous growth with human and physical capital: balanced growth and transitional dynamics,"
9324, Federal Reserve Bank of Dallas.
- Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January.
- Chang-Tai Hsieh & Peter Klenow, 2009.
"Misallocation and Manufacturing TFP in China and India,"
09-04, Center for Economic Studies, U.S. Census Bureau.
- Chang-Tai Hsieh & Peter J. Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1403-1448, November.
- Chang-Tai Hsieh & Peter J. Klenow, 2007. "Misallocation and Manufacturing TFP in China and India," NBER Working Papers 13290, National Bureau of Economic Research, Inc.
- Chang-Tai Hsieh & Peter J. Klenow, 2007. "Misallocation and Manufacturing TFP in China and India," Discussion Papers 07-006, Stanford Institute for Economic Policy Research.
- Chang-Tai Hsieh & Peter J Klenow, 2008. "Misallocation and Manufacturing TFP in China and India," 2008 Meeting Papers 121, Society for Economic Dynamics.
- Chang, Tai Hsieh & Peter, J- Klenow, 2007. "Misallocation and manufacturing TFP in China and India," MPRA Paper 35084, University Library of Munich, Germany, revised 15 Jun 2007.
- Cremers, Emily T., 2006. "Dynamic efficiency in the two-sector overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 1915-1936, November.
- Docquier, Frederic & Paddison, Oliver & Pestieau, Pierre, 2007.
"Optimal accumulation in an endogenous growth setting with human capital,"
Journal of Economic Theory,
Elsevier, vol. 134(1), pages 361-378, May.
- Docquier, Frédéric & Paddison, Oliver & Pestieau, Pierre, 2006. "Optimal Accumulation in an Endogenous Growth Setting with Human Capital," IZA Discussion Papers 2081, Institute for the Study of Labor (IZA).
- DOCQUIER, Frédéric & PADDISON, Oliver & PESTIEAU, Pierre, . "Optimal accumulation in an endogenous growth setting with human capital," CORE Discussion Papers RP -2021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Frederic, DOCQUIER & Oliver, Paddison & Pierre PESTIEAU, 2006. "Optimal accumulation in an endogenous growth setting with human capital," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2006022, Université catholique de Louvain, Département des Sciences Economiques.
- Hernando Zuleta & Andrew T. Young, 2010.
"Labor’s Shares in a Model of Induced Innovation,"
10-01, Department of Economics, West Virginia University.
- David Evans & Haluk Sezer, 2004. "Social discount rates for six major countries," Applied Economics Letters, Taylor & Francis Journals, vol. 11(9), pages 557-560.
- Kazuo Mino & Kazuo Nishimura & Koji Shimomura & Ping Wang, 2005.
"Equilibrium Dynamics in Discrete-Time Endogenous Growth Models with Social Constant Returns,"
Discussion Papers in Economics and Business
05-34, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
- Kazuo Mino & Kazuo Nishimura & Koji Shimomura & Ping Wang, 2008. "Equilibrium dynamics in discrete-time endogenous growth models with social constant returns," Economic Theory, Springer, vol. 34(1), pages 1-23, January.
- Akos Valentinyi & Berthold Herrendorf, 2008.
"Measuring Factor Income Shares at the Sectoral Level,"
IEHAS Discussion Papers
0803, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
- Boldrin, Michele & Montes, Ana, 2002.
"The Intergenerational State: Education and Pensions,"
CEPR Discussion Papers
3275, C.E.P.R. Discussion Papers.
- Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 651-664.
- Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
- Chanda, Areendam, 2008.
"The rise in returns to education and the decline in household savings,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 32(2), pages 436-469, February.
- Areendam Chanda, 2005. "The Rise in Returns to Education and the Decline in Household Savings," Macroeconomics 0502034, EconWPA.
- Areendam Chanda, . "The Rise in Returns to Education and the Decline in Household Savings," Departmental Working Papers 2005-05, Department of Economics, Louisiana State University.
- Takahashi, Harutaka & Mashiyama, Koichi & Sakagami, Tomoya, 2012. "Does The Capital Intensity Matter? Evidence From The Postwar Japanese Economy And Other Oecd Countries," Macroeconomic Dynamics, Cambridge University Press, vol. 16(S1), pages 103-116, April.
- Marion Davin & Karine Gente & Carine Nourry, 2011.
"Social Optimum in an OLG Model with Paternalistic Altruism,"
- Marion Davin & Karine Gente & Carine Nourry, 2012. "Social optimum in an OLG model with paternalistic altruism," Economics Bulletin, AccessEcon, vol. 32(4), pages 3417-3424.
- Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-86, November.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yves Doazan).
If references are entirely missing, you can add them using this form.