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Intergenerational human capital evolution, local public good preferences, and stratification

  • Chen, Been-Lon
  • Peng, Shin-Kun
  • Wang, Ping

This paper considers heterogeneities in preferences over the local public good, human capital formation, and residential locations as primary underlying forces of economic stratification in an endogenously growing economy. We construct a two-period overlapping-generations model with two regions and various forms of human capital externalities where altruistic agents determine intertemporal allocation of time, investment in a child's education and residential location. We fully characterize a balanced growth equilibrium with no migration across generations to elaborate on how changes in preference, human capital accumulation, production, and interregional commuting parameters may affect the equilibrium stratification outcome in the long run.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165-1889(08)00166-8
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 3 (March)
Pages: 745-757

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:3:p:745-757
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  1. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  2. Marcus Berliant & Shin-Kun Peng & Ping Wang, 2004. "Welfare Analysis of the Number and Locations of Local Public Facilities," Public Economics 0407015, EconWPA, revised 20 Jul 2005.
  3. Bergstrom, Theodore C & Cornes, Richard C, 1983. "Independence of Allocative Efficiency from Distribution in the Theory of Public Goods," Econometrica, Econometric Society, vol. 51(6), pages 1753-65, November.
  4. Thomas. J. Nechyba, 1997. "Existence of equilibrium and stratification in local and hierarchical Tiebout economies with property taxes and voting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(2), pages 277-304.
  5. Roland Bénabou, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 237-264.
  6. Roland Benabou, 1993. "Heterogeneity, Stratification, and Growth," NBER Working Papers 4311, National Bureau of Economic Research, Inc.
  7. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  8. Glomm, Gerhard & Ravikumar, B, 1992. "Public versus Private Investment in Human Capital Endogenous Growth and Income Inequality," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 818-34, August.
  9. Gary S. Becker & Kevin M. Murphy & Robert Tamura, . "Human Capital, Fertility, and Economic Growth," University of Chicago - Population Research Center 90-5a, Chicago - Population Research Center.
  10. Hartwick, John & Schweizer, Urs & Varaiya, Pravin, 1976. "Comparative statics of a residential economy with several classes," Journal of Economic Theory, Elsevier, vol. 13(3), pages 396-413, December.
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