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Human Capital Accumulation According to HANK

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  • INOSE Junya

Abstract

The heterogeneous model in macroeconomics has produced great developments in recent decades. One major development which includes heterogeneity relates to consumer behavior, especially in describing income and wealth inequality. More powerful and sophisticated computing technologies and the increasing availability of microdata have fueled these developments. Among these developments is the invention of the Heterogeneous agent New Keynesian (HANK) models. We advanced the Huggett model of income and wealth distribution to include human capital accumulation. The inclusion of human capital accumulation into a heterogeneous agent model enables us to capture not only wealth, but skill inequality and its dynamics. This paper provides two main contributions. We (i) construct a mathematical tool to analyze models with non-linearity, and (ii) provide implications for the policy of wealth redistribution, especially basic income. The conclusions of this analysis can be again summarized by the following three points: (i) the introduction of basic income may increase the share of liquidity constrained households, (ii) the introduction of basic income results in a decrease of the aggregate share of time spent investing in human capital, and (iii) the introduction of basic income may increase consumption and this may result in an increase in the interest rate.

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  • INOSE Junya, 2021. "Human Capital Accumulation According to HANK," Discussion papers 21070, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:21070
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    1. Greg Kaplan & Benjamin Moll & Giovanni L. Violante, 2018. "Monetary Policy According to HANK," American Economic Review, American Economic Association, vol. 108(3), pages 697-743, March.
    2. Joachim Hubmer & Per Krusell & Anthony A. Smith Jr., 2020. "Sources of US Wealth Inequality: Past, Present, and Future," NBER Chapters, in: NBER Macroeconomics Annual 2020, volume 35, pages 391-455, National Bureau of Economic Research, Inc.
    3. Joachim Hubmer & Per Krusell & Anthony A. Smith., 2021. "Sources of US Wealth Inequality: Past, Present, and Future," NBER Macroeconomics Annual, University of Chicago Press, vol. 35(1), pages 391-455.
    4. Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October.
    5. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969.
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