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Inflation and human capital formation : theory and panel data evidence

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Author Info
F. HEYLEN ()
A. SCHOLLAERT ()
G. EVERAERT ()
L. POZZI ()

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Abstract

Existing monetary growth theories predict either negative or neutral effects from inflation on human capital. In this paper we develop a simple alternative model, which can generate positive effects. Our empirical analysis for 93 countries in 1975-1995 tends to confirm these positive effects. Using recent GMM panel data procedures, we find that rising inflation basically stimulates human capital. A robust negative effect can be observed only at extremely high inflation rates. A representative threshold may be 100%. For inflation rates below 15%, the effect of rising inflation seems insignificant. The latter result can also be rationalized from our model.

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Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 03/174.

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Length: 32 pages
Date of creation: Apr 2003
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Handle: RePEc:rug:rugwps:03/174

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Related research
Keywords: Human capital education inflation monetary growth models panel data

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Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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Cited by:
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  1. D. Van Den Poel, 2003. "Predicting Mail-Order Repeat Buying: Which Variables Matter?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/191, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
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