Human capital Kuznets curve with subsistence consumption level
We examine the human capital Kuznets curve in a simple model that does not assume increasing returns to scale in human capital formation. With a utility function that specifies a subsistence consumption level, consumption is a necessary good and education is a luxury good. As the children of poor households receive a low level of education, the gap in human capital endowments expands between poor and rich households. Eventually, economic development increases income and expenditure for education, and income inequality declines.
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