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Capital Augmenting and Labor Augmenting Approach in Measuring Contribution of Human Capital and Education to Economic Growth

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Listed author(s):
  • Popović, Milenko

Abstract

In this paper an effort has been made to unveil some hidden and implicit assumptions that has been used in different models dealing with analysis and measurement of contribution of human capital to economic growth. We start from general production function with heterogeneous labor input and general production function with heterogeneous human and physical capital. By introducing different assumptions regarding partial elasticity of substitution between different factors of production we derived different models for human capital contribution. Apart from making hidden assumptions of existing models explicit, we also derived dozen of others models that can be used for same purposes. Among those newly proposed models especially important are those that are derived from general production function with heterogeneous human capital and that are based on assumption of unlimited partial elasticity of substitution between different kinds of human capital. First, they allow for more detailed sources of growth analysis. Second, they do not have any problem with wage premium increase experienced in last three decade, which make problematic usage of most of other models used so far.

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File URL: https://www.econstor.eu/bitstream/10419/82822/1/2.%20Lbor%26Capital%20Adjusted%20Approach_WP.pdf
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Article provided by ZBW - German National Library of Economics in its journal EconStor Open Access Articles.

Volume (Year): (2006)
Issue (Month): ()
Pages: 71-108

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Handle: RePEc:zbw:espost:82822
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Keywords: economic growth; human capital; education;

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Find related papers by JEL classification:
  • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
  • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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Cited by:

  1. Darko Lazarov & Goce Petreski, 2016. "Human Capital as a Binding Constraint to Economic Growth: The Case of Macedonia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 18(1), pages 35-70, June.
  2. Mirjana cizmovic & Jelena Jankovic & Milenko Popovic, 2015. "Growth Anatomy of Croatian Economy," Ekonomija Economics, Rifin d.o.o., vol. 22(1), pages 159-216.
  3. Milenko Popovic, 2007. "Rising Wage Inequality, Rate Of Return On Investment In Education, And Cost Of Education," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 3(5), pages 35-58.

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