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How inequality hurts growth: Revisiting the Galor-Zeira model through a Korean case

Author

Listed:
  • Jun, Bogang

    (Massachusetts Institute of Technology, The MIT Media Lab)

  • Kaltenberg, Mary

    (UNU-MERIT, Maastricht University, and Massachusetts Institute of Technology, The MIT Media Lab)

  • Hwang, Won-sik

    (Korea Institute for Industrial Economics and Trade)

Abstract

This paper aims to show that the level of inequality increases via the human capital channel with credit market imperfections generating negative effects on economic growth. We expand the model presented by Galor and Zeira (1993) to represent the fact that the economy benefits from endogenous technological progress and that the government provides financial aid to reduce the financial hurdles for human capital accumulation. We use Korean data from 1998 to 2008 to empirically confirm that education plays a significant role in the divergence of household wealth over time and that the government's financial aid package in the form of the new student loans programme positively influences equality and short-run economic growth by promoting the number of skilled workers.

Suggested Citation

  • Jun, Bogang & Kaltenberg, Mary & Hwang, Won-sik, 2017. "How inequality hurts growth: Revisiting the Galor-Zeira model through a Korean case," MERIT Working Papers 2017-034, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2017034
    as

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    File URL: https://www.merit.unu.edu/publications/wppdf/2017/wp2017-034.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Human Capital; Economic Growth; Inequality; South Korea;
    All these keywords.

    JEL classification:

    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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