The Role of Rents to Human Capital in Economic Development
AbstractIn 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 InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 923.
Date of creation: Mar 1994
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Other versions of this item:
- Saint-Paul, Gilles, 1997. "The role of rents to human capital in economic development," Journal of Development Economics, Elsevier, vol. 53(2), pages 229-249, August.
- Saint-Paul, G., 1994. "The Role of Rents to Human Capital in Economic Development," DELTA Working Papers 94-01, DELTA (Ecole normale supérieure).
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
- H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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