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Human Capital Investment, Inequality and Economic Growth

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  • Kevin M. Murphy
  • Robert H. Topel

Abstract

We treat rising inequality is an equilibrium outcome in which human capital investment fails to keep pace with rising demand for skills. Investment affects skill supply and prices on three margins: the type of human capital in which to invest; how much to acquire; and the intensity of use. The latter two represent the intensive margins of human capital acquisition and utilization. These choices are substitutes for the creation of new skilled workers, yet they are complementary with each other, magnifying inequality. When skill-biased technical change drives economic growth, greater inequality reduces growth.

Suggested Citation

  • Kevin M. Murphy & Robert H. Topel, 2016. "Human Capital Investment, Inequality and Economic Growth," NBER Working Papers 21841, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21841
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    6. Jaison R. Abel & Richard Florida & Todd M. Gabe, 2018. "Can low-wage workers find better jobs?," Staff Reports 846, Federal Reserve Bank of New York.
    7. Christian Belzil & Jörgen Hansen & Xingfei Liu, 2022. "The Evolution of Inequality in Education Trajectories and Graduation Outcomes in the US," Working Papers 2022-12, Center for Research in Economics and Statistics.
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    12. Gillman, Max, 2021. "Steps in industrial development through human capital deepening," Economic Modelling, Elsevier, vol. 99(C).
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    16. Nelson R. Ramírez- Rondán & Marco E. Terrones & Diego Winkelried, 2020. "Equalizing growth: The case of Peru," Working Papers 176, Peruvian Economic Association.
    17. Robert Kaestner & Darren Lubotsky, 2016. "Health Insurance and Income Inequality," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 53-78, Spring.
    18. Iván Fernández‐Val & Aico van Vuuren & Francis Vella & Franco Peracchi, 2023. "Selection and the distribution of female real hourly wages in the United States," Quantitative Economics, Econometric Society, vol. 14(2), pages 571-607, May.
    19. Joachim Freyberger, 2021. "Normalizations and misspecification in skill formation models," Papers 2104.00473, arXiv.org, revised Jul 2022.
    20. Matthias Haslberger, 2021. "Routine-Biased Technological Change Does Not Always Lead to Polarisation: Evidence from 10 OECD Countries, 1995-2013," LIS Working papers 814, LIS Cross-National Data Center in Luxembourg.
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    22. Abla A. H. Bokhari, 2017. "Human Capital Investment and Economic Growth in Saudi Arabia: Error Correction Model," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 104-112.
    23. Pies, Ingo, 2021. "Kapitalismus als System zur Verwirklichung moralischer Anliegen - Ordonomische Denkanstöße," Discussion Papers 2021-01, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
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    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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