This paper provides a signalling model of endogenous growth in which innate talents and education levels of workers drive the basic scientific knowledge and adoptive knowledge accumulation processes. Whether talented individuals get properly educated and are employed in the appropriate technical sectors are determined by the perfectly competitive employers' beliefs about the relationship between talent and education level. Innate talent of a worker is a private knowledge and it is distributed independent of the individual's family backgrounds; education level of workers act as a signalling device for talents as well as it improves their productivities; the family backgrounds and talents of workers determine their optimal education level, which in turn determines the degree of social mobility. The model generates multiple balanced growth paths which differ in the degree of intergenerational social mobility and growth rate. The paper analyzes policies that generate equilibrium paths with higher social mobility, growth in income and Pareto superior allocations.
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Length: 19 pages Date of creation: 19 Mar 1996 Date of revision: Handle: RePEc:wpa:wuwpge:9603002
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Find related papers by JEL classification: J62 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Job, Occupational and Intergenerational Mobility; Promotion D3 - Microeconomics - - Distribution D9 - Microeconomics - - Intertemporal Choice and Growth
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