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From Physical to Human Capital Accumulation: Inequality and the Process of Development

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Author Info
Oded Galor (Brown University & Hebrew University)
Omer Moav (Hebrew University)

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Abstract

This paper develops a growth theory that captures the replacement of physical capital accumulation by human capital accumulation as a prime engine of growth along the process of development. It argues that the positive impact of inequality on the growth process was reversed in this process. In early stages of the Industrial Revolution, when physical capital accumulation was the prime source of growth, inequality stimulated development by channeling resources towards individuals with a higher propensity to save. As human capital emerged as a growth engine, equality alleviated adverse effects of credit constraints on human capital accumulation, stimulating the growth process.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0410005.

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Length: 35 pages
Date of creation: 05 Oct 2004
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Handle: RePEc:wpa:wuwpge:0410005

Note: Type of Document - pdf; pages: 35
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Web page: http://129.3.20.41

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Related research
Keywords: Income Distributions; Growth; Credit Constraints; Human Capital;

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Find related papers by JEL classification:
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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