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On the institutional limits to human capital

In: Investigaciones de Economía de la Educación 9

Listed author(s):
  • Rossana Patron

    ()

    (Universidad de la Republica/University of Nottingham)

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    Education as an investment has competitive investment assets to which is compared usually by the respective return rates, that crucially depend on institutional quality. High returns to education depend on education quality whereas returns to rent seeking are basically determined by the quality of economic institutions. To analyse the implications of these settings an extension of standard OLG models is designed to allow for rent seeking activities (when institutions are weak) as an alternative to invest in human capital, affecting long term growth. The analysis shows that in the long term the individual welfare maximising behaviour leads to stationary equilibrium where human capital accumulation stops: when rent seeking is present and/or individuals are impatience it is reached a long term equilibrium with lower levels of human capital. Then, the pursuit of individuals’ profits leads in the long term to an impoverished situation to individuals due to output level stagnation; from this, an immediate implication is that reducing incentives to rent seeking by enhancing institutional settings, becomes a close substitute to allocate more resources to education investment in the short term, an a more effective option in the long term.

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    This chapter was published in:
  • Adela García Aracil & Isabel Neira Gómez (ed.), 2014. "Investigaciones de Economía de la Educación," E-books Investigaciones de Economía de la Educación, Asociación de Economía de la Educación, edition 1, volume 9, number 09, August.
  • This item is provided by Asociación de Economía de la Educación in its series Investigaciones de Economía de la Educación volume 9 with number 09-45.
    Handle: RePEc:aec:ieed09:09-45
    Contact details of provider: Web page: http://www.economicsofeducation.com

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    1. John Bishop & Ludger Wossmann, 2004. "Institutional Effects in a Simple Model of Educational Production," Education Economics, Taylor & Francis Journals, vol. 12(1), pages 17-38.
    2. George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, vol. 12(2), pages 111-134.
    3. Barham, Vicky & Boadway, Robin & Marchand, Maurice & Pestieau, Pierre, 1995. "Education and the poverty trap," European Economic Review, Elsevier, vol. 39(7), pages 1257-1275, August.
    4. Stephen Machin & Olivier Marie & Sunčica Vujić, 2011. "The Crime Reducing Effect of Education," Economic Journal, Royal Economic Society, vol. 121(552), pages 463-484, 05.
    5. Paolo Buonanno & Leone Leonida, 2006. "Education and crime: evidence from Italian regions," Applied Economics Letters, Taylor & Francis Journals, vol. 13(11), pages 709-713.
    6. Wilson, Kathryn, 2002. "The effects of school quality on income," Economics of Education Review, Elsevier, vol. 21(6), pages 579-588, December.
    7. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    8. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09.
    9. Lance Lochner, 2004. "Education, Work, And Crime: A Human Capital Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 811-843, 08.
    10. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
    11. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    12. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1-9.
    13. Dias, Joilson & Tebaldi, Edinaldo, 2012. "Institutions, human capital, and growth: The institutional mechanism," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 300-312.
    14. Mehlum, Halvor & Moene, Karl & Torvik, Ragnar, 2005. "Crime induced poverty traps," Journal of Development Economics, Elsevier, vol. 77(2), pages 325-340, August.
    15. Altonji, Joseph G & Dunn, Thomas A, 1996. "Using Siblings to Estimate the Effect of School Quality on Wages," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 665-671, November.
    16. Luciano Mauro & Gaetano Carmeci, 2007. "A Poverty Trap of Crime and Unemployment," Review of Development Economics, Wiley Blackwell, vol. 11(3), pages 450-462, 08.
    17. repec:kap:iaecre:v:17:y:2011:i:2:p:224-235 is not listed on IDEAS
    18. Ceroni, Carlotta Berti, 2001. "Poverty Traps and Human Capital Accumulation," Economica, London School of Economics and Political Science, vol. 68(270), pages 203-219, May.
    19. Maria Emma Santos, 2011. "Human Capital and the Quality of Education in a Poverty Trap Model," Oxford Development Studies, Taylor & Francis Journals, vol. 39(1), pages 25-47.
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