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Education and Growth: A Simple Model with Complicated Dynamics

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We construct a simple model of education and growth in which young adults (children) spend a fraction of their time and old adults (parents) spend a fraction of their income on education. Both a strategic complementarity and an intergener- ational externality in the creation of human capital are present. The interactions between each pair of consecutive generations lead to rich dynamics. We show that multiple growth equilibria arise, some of them periodic and some aperiodic. We also ?nd a negative correlation between volatility and growth, without a one-way causal relationship between the two being, necessarily, present. Rather this negative correlation is driven by the structural characteristics of the economy.

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Paper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number 2009_08.

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Date of creation: Apr 2009
Date of revision: Apr 2009
Handle: RePEc:mcd:mcddps:2009_08

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Web page: http://www.uom.gr/index.php?tmima=3

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Keywords: Education; Human Capital; Economic Growth.;

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  1. Klaus, WAELDE, 2003. "Endogenous growth cycles," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2004012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 15 Mar 2004.
  2. Matsuyama, K., 1996. "Growing through cycles," DELTA Working Papers, DELTA (Ecole normale supérieure) 96-18, DELTA (Ecole normale supérieure).
  3. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 37(1), pages 112-156, March.
  4. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  5. C. Berti Ceroni, 1998. "Poverty Traps and Human Capital Accumulation," Working Papers 315, Dipartimento Scienze Economiche, Universita' di Bologna.
  6. Theodore Palivos & Dimitrios Varvarigos, 2009. "Intergenerational Complementarities in Education and the Relationship between Growth and Volatility," Discussion Paper Series, Department of Economics, University of Macedonia 2009_05, Department of Economics, University of Macedonia, revised Mar 2009.
  7. Keith Blackburn & Dimitrios Varvarigos, 2008. "Human capital accumulation and output growth in a stochastic environment," Economic Theory, Springer, Springer, vol. 36(3), pages 435-452, September.
  8. Femminis, Gianluca, 2001. " Risk-Sharing and Growth: The Role of Precautionary Savings in the "Education" Model," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 103(1), pages 63-77, March.
  9. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, Elsevier, vol. 24(2), pages 259-276, September.
  10. Glomm, Gerhard, 1997. "Parental choice of human capital investment," Journal of Development Economics, Elsevier, Elsevier, vol. 53(1), pages 99-114, June.
  11. Ramey, Garey & Ramey, Valerie A, 1995. "Cross-Country Evidence on the Link between Volatility and Growth," American Economic Review, American Economic Association, American Economic Association, vol. 85(5), pages 1138-51, December.
  12. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, Elsevier, vol. 34(2), pages 143-173, October.
  13. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(1), pages 39-69, February.
  14. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, American Economic Association, vol. 91(2), pages 12-17, May.
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Cited by:
  1. Theodore Palivos & Dimitrios Varvarigos, 2013. "Intergenerational Complementarities in Education, Endogenous Public Policy, and the Relation Between Growth and Volatility," Journal of Public Economic Theory, Association for Public Economic Theory, Association for Public Economic Theory, vol. 15(2), pages 249-272, 04.
  2. Theodore Palivos & Dimitrios Varvarigos, 2010. "Pollution Abatement as a Source of Stabilisation and Long-Run Growth," Discussion Papers in Economics, Department of Economics, University of Leicester 11/04, Department of Economics, University of Leicester, revised Oct 2010.
  3. Anastasia Litina & Theodore Palivos, 2014. "Corruption, Tax Evasion and Social Values," CREA Discussion Paper Series 14-10, Center for Research in Economic Analysis, University of Luxembourg.

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