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Human Capital Investment, Inequality, and Economic Growth

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  • Kevin M. Murphy
  • Robert H. Topel

Abstract

We treat rising inequality as an equilibrium outcome in which human capital investment fails to keep pace with rising demand for skills. Investment affects skill supply and prices on three margins: the type of human capital in which to invest, how much to acquire, and the intensity of use. The latter two represent the intensive margins of human capital acquisition and utilization. These choices are substitutes for the creation of new skilled workers, yet they are complementary with each other, magnifying inequality. When skill-biased technical change drives economic growth, greater inequality reduces growth.

Suggested Citation

  • Kevin M. Murphy & Robert H. Topel, 2016. "Human Capital Investment, Inequality, and Economic Growth," Journal of Labor Economics, University of Chicago Press, vol. 34(S2), pages 99-127.
    • Handle: RePEc:ucp:jlabec:doi:10.1086/683779
    DOI: 10.1086/683779
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    3. Winters, John V., 2020. "Problem on the Plains: College Earnings Premiums in Small Metropolitan Areas," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 51(1), December.
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    5. Iv'an Fern'andez-Val & Franco Peracchi & Aico van Vuuren & Francis Vella, 2018. "Selection and the Distribution of Female Hourly Wages in the U.S," Papers 1901.00419, arXiv.org, revised Jan 2022.
    6. Jaison R. Abel & Richard Florida & Todd M. Gabe, 2018. "Can low-wage workers find better jobs?," Staff Reports 846, Federal Reserve Bank of New York.
    7. Christian Belzil & Jörgen Hansen & Xingfei Liu, 2022. "The Evolution of Inequality in Education Trajectories and Graduation Outcomes in the US," Working Papers 2022-12, Center for Research in Economics and Statistics.
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    11. Charles M. Beach, 2016. "Changing income inequality: A distributional paradigm for Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(4), pages 1229-1292, November.
    12. Gillman, Max, 2021. "Steps in industrial development through human capital deepening," Economic Modelling, Elsevier, vol. 99(C).
    13. Christian Belzil & Jorgen Hansen & Xingfei Liu, 2017. "Dynamic skill accumulation, education policies, and the return to schooling," Quantitative Economics, Econometric Society, vol. 8(3), pages 895-927, November.
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    16. Nelson R. Ramírez- Rondán & Marco E. Terrones & Diego Winkelried, 2020. "Equalizing growth: The case of Peru," Working Papers 176, Peruvian Economic Association.
    17. Robert Kaestner & Darren Lubotsky, 2016. "Health Insurance and Income Inequality," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 53-78, Spring.
    18. Iván Fernández‐Val & Aico van Vuuren & Francis Vella & Franco Peracchi, 2023. "Selection and the distribution of female real hourly wages in the United States," Quantitative Economics, Econometric Society, vol. 14(2), pages 571-607, May.
    19. Joachim Freyberger, 2021. "Normalizations and misspecification in skill formation models," Papers 2104.00473, arXiv.org, revised Jul 2022.
    20. Matthias Haslberger, 2021. "Routine-Biased Technological Change Does Not Always Lead to Polarisation: Evidence from 10 OECD Countries, 1995-2013," LIS Working papers 814, LIS Cross-National Data Center in Luxembourg.
    21. Janka Beresecká & Martin Hronec & Štefan Hronec & Jana Hroncová-Vicianová, 2022. "The impact of top management education on the socially responsible management of local government in the context of investment development," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 10(2), pages 608-622, December.
    22. Abla A. H. Bokhari, 2017. "Human Capital Investment and Economic Growth in Saudi Arabia: Error Correction Model," International Journal of Economics and Financial Issues, Econjournals, vol. 7(4), pages 104-112.
    23. Pies, Ingo, 2021. "Kapitalismus als System zur Verwirklichung moralischer Anliegen - Ordonomische Denkanstöße," Discussion Papers 2021-01, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    24. Todd Gabe & Jaison R. Abel & Richard Florida, 2019. "Can Workers in Low-End Occupations Climb the Job Ladder?," Economic Development Quarterly, , vol. 33(2), pages 92-106, May.
    25. Beatriz Larraz & Jose M. Pavía & Marcos Herrera‐Gómez, 2021. "Spatial aggregation and resampling expansion of big surveys: An analysis of wage inequality," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(3), pages 957-981, June.

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