Government and human capital in a model of development through modernization and specialization
AbstractEconomic development is associated with the shift of production from the traditional sector (e.g. traditional agriculture and the urban informal sector) to the modern sector (e.g. modern manufacturing and commercial agriculture). Human capital accumulation, particularly, education and job training of skilled workers, is a crucial factor in the modernization of an economy. Several institutions such as the protection of property rights and the strength of the rule of law also are considered essential. Thus, the government has an important role as the main provider of 'institution-maintaining' services, although it often faces a difficulty in providing adequate amounts of the services due to costly hiring of educated officers and tax avoidance. This paper analyzes interactions among taxation, the provision of the public services, human capital accumulation, and modernization, based on a dynamic dual economy model, which draws on the Becker and Murphy (1992) model of skill and task specialization, and examines conditions for successful development. Distributions of political power and wealth as well as sectoral productivities and the cost of education affect the outcome qualitatively. In particular, the socially desirable distribution of political power is such that educated (uneducated) individuals should have dominant power at an early (late) stage of development. Further, it is shown that several novel or overlooked inefficiencies arise naturally from realistic features of the model and appropriate redistribution can correct the inefficiencies except at a fairly early stage of development.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19760.
Date of creation: Dec 2009
Date of revision:
dual economy; government; human capital; inequality; overeducation; redistribution; specialization;
Find related papers by JEL classification:
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-HRM-2010-01-16 (Human Capital & Human Resource Management)
- NEP-LAB-2010-01-16 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bourguignon, Francois & Verdier, Thierry, 2000.
"Oligarchy, democracy, inequality and growth,"
Journal of Development Economics,
Elsevier, vol. 62(2), pages 285-313, August.
- Keefer, Philip & Knack, Stephen, 1997. "Why Don't Poor Countries Catch Up? A Cross-National Test of Institutional Explanation," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 590-602, July.
- Burgess, Robin & Stern, Nicholas, 1993. "Taxation and Development," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 762-830, June.
- Kazuhiro Yuki, 2005.
"Sectoral Shift, Wealth Distribution, and Development,"
Development and Comp Systems
- Yuki, Kazuhiro, 2008. "Sectoral Shift, Wealth Distribution, And Development," Macroeconomic Dynamics, Cambridge University Press, vol. 12(04), pages 527-559, September.
- Yuki, Kazuhiro, 2007. "Sectoral Shift, Wealth Distribution, and Development," MPRA Paper 3384, University Library of Munich, Germany.
- Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002.
"Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development,"
CEPR Discussion Papers
3643, C.E.P.R. Discussion Papers.
- Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
- Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
- Friedrich Schneider, 2004.
"Shadow Economies around the World: What do we really know?,"
IAW Discussion Papers
16, Institut für Angewandte Wirtschaftsforschung (IAW).
- Schneider, Friedrich, 2005. "Shadow economies around the world: what do we really know?," European Journal of Political Economy, Elsevier, vol. 21(3), pages 598-642, September.
- Mo, Pak Hung, 2001. "Corruption and Economic Growth," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 66-79, March.
- Easterly, William, 2007. "Inequality does cause underdevelopment: Insights from a new instrument," Journal of Development Economics, Elsevier, vol. 84(2), pages 755-776, November.
- Acemoglu, Daron & Johnson, Simon & Robinson, James A & Yared, Pierre, 2005.
"Income and Democracy,"
CEPR Discussion Papers
5273, C.E.P.R. Discussion Papers.
- Daron Acemoglu & Simon Johnson & James A. Robinson & Pierre Yared, 2005.
"From Education to Democracy?,"
NBER Working Papers
11204, National Bureau of Economic Research, Inc.
- Deininger, Klaus & Olinto, Pedro, 2000. "Asset distribution, inequality, and growth," Policy Research Working Paper Series 2375, The World Bank.
- Rita Asplund, 2005. "The Provision and Effects of Company Training: A Brief Review of the Literature," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 31, pages 47-73.
- Ljungqvist, Lars, 1993. "Economic underdevelopment : The case of a missing market for human capital," Journal of Development Economics, Elsevier, vol. 40(2), pages 219-239, April.
- Hristos Doucouliagos & Mehmet Ulubasoglu, 2006. "Democracy and Economic Growth: A Meta-Analysis," Economics Series 2006_04, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
- Davis, Lewis S., 2003. "The division of labor and the growth of government," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1217-1235, May.
- Daron Acemoglu, 2005.
"Politics and Economics in Weak and Strong States,"
NBER Working Papers
11275, National Bureau of Economic Research, Inc.
- Galor, Oded & Zeira, Joseph, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 35-52, January.
- Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
- Tamura, Robert, 1996.
"Regional economies and market integration,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 20(5), pages 825-845, May.
- Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
- Yuki, Kazuhiro, 2007. "Urbanization, informal sector, and development," Journal of Development Economics, Elsevier, vol. 84(1), pages 76-103, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.