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Why Isn't Convergence Instantaneous? Young Workers, Old Workers, and Gradual Adjustment

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  • Kremer, Michael
  • Thomson, James

Abstract

The human capital of young and old workers are imperfect substitutes both in production and in providing on-the-job training. This helps explain why capital does not flow from rich to poor countries, causing instantaneous convergence of per capita output. If each generation chooses its human capital optimally, given that of the preceding and succeeding generations, human capital follows a unique rational-expectations path. For moderate substitutability, human capital within each sector oscillates relative to that in other sectors, but aggregate human capital converges to the steady state monotonically. Copyright 1998 by Kluwer Academic Publishers

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  • Kremer, Michael & Thomson, James, 1998. "Why Isn't Convergence Instantaneous? Young Workers, Old Workers, and Gradual Adjustment," Journal of Economic Growth, Springer, vol. 3(1), pages 5-28, March.
  • Handle: RePEc:kap:jecgro:v:3:y:1998:i:1:p:5-28
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    Cited by:

    1. Rojas, Juan A., 2005. "Life-cycle earnings, cohort size effects and social security: a quantitative exploration," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 465-485, February.
    2. Petr Duczynski, 2000. "Capital Mobility in NeoClassical Models of Growth: Comment," American Economic Review, American Economic Association, vol. 90(3), pages 687-694, June.
    3. Boyan Jovanovic, 2009. "When should firms invest in old capital?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(1), pages 107-123.
    4. Juan A. Rojas, 2009. "Social Security reform with imperfect substitution between less and more experienced workers," Working Papers 0832, Banco de EspaƱa;Working Papers Homepage.
    5. David E. Wildasin, 2006. "Global Competition for Mobile Resources: Implications for Equity, Efficiency and Political Economy," CESifo Economic Studies, CESifo, vol. 52(1), pages 61-110, March.
    6. Petr Duczynski, 1999. "Adjustment Costs in a Two-Capital Growth Model," CERGE-EI Working Papers wp144, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    7. Duflo, Esther, 2004. "The medium run effects of educational expansion: evidence from a large school construction program in Indonesia," Journal of Development Economics, Elsevier, vol. 74(1), pages 163-197, June.
    8. Casey B. Mulligan, 2000. "Can Monopoly Unionism Explain Publicly Induced Retirement?," NBER Working Papers 7680, National Bureau of Economic Research, Inc.
    9. Mathieu-Bolh, Nathalie & Pautrel, Xavier, 2016. "Reassessing the effects of environmental taxation when pollution affects health over the life-cycle," Economic Modelling, Elsevier, vol. 52(PB), pages 310-321.
    10. Verdier, Genevieve, 2008. "What drives long-term capital flows A theoretical and empirical investigation," Journal of International Economics, Elsevier, vol. 74(1), pages 120-142, January.
    11. Duczynski, Petr, 2002. "Adjustment costs in a two-capital growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 837-850, May.
    12. Jordan Rappaport, 2000. "Is the speed of convergence constant?," Research Working Paper RWP 00-10, Federal Reserve Bank of Kansas City.
    13. Alders, Peter, 2005. "Human capital growth and destruction: the effect of fertility on skill obsolescence," Economic Modelling, Elsevier, vol. 22(3), pages 503-520, May.
    14. Takeshi Kobayashi & Masaya Sakuragawa, 2008. "Boom and Bust Cycle of the Stock Market, and Economic Growth in a Vintage Capital Model," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(3), pages 411-432.
    15. Birchenall, Javier A., 2008. "Equilibrium, convergence, and capital mobility in neoclassical models of growth," Economics Letters, Elsevier, vol. 99(1), pages 10-13, April.

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