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The conflating effects of education and financial competition in an OLG growth model with Nelson-Phelps human capital

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  • Mark A Roberts

Abstract

The Nelson-Phelps (N-P) concept of human capital, which determines the speed at which a new technology may be implemented, is considered within an AK, overlapping-generations model to produce a generalized dynamic form. Finance firms are assumed to act as local monopolies in the market for loans to production firms but as monopsonistic price-takers in the deposit market for households. Households also vote for taxes that are earmarked to pay for public education, which determines the subsequent level of N-P human capital. The main result is that a concentrated financial market structure, although directly lowering economic growth, may indirectly raise it through provoking a political economy response of voting for higher taxes to pay for a greater future, level of N-P human capital.

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  • Mark A Roberts, 2012. "The conflating effects of education and financial competition in an OLG growth model with Nelson-Phelps human capital," Discussion Papers 12/07, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    • Handle: RePEc:not:notcfc:12/07
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    References listed on IDEAS

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    1. John Driffill, 2003. "Growth and Finance," Manchester School, University of Manchester, vol. 71(4), pages 363-380, July.
    2. 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, vol. 34(2), pages 143-173, October.
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