Should a Country Invest more in Human or Physical Capital? A Two-Sector Endogenous Growth Approach
Should a country invest more in human or physical capital? The present paper addresses this issue, considering the impact of different factor intensities between sectors on both optimal human and physical capital accumulation. Using a two-sector overlapping generations setting with endogenous growth driven by human capital accumulation, we prove that relative factor intensity between sectors drastically shapes the welfare analysis: two laissez-faire economies with the same global capital share may generate physical capital excess or scarcity, with respect to the optimum. The model for the Japanese economy, that experienced a factor intensity reversal after the oil shock, is then calibrated. It is shown that Japan invested relatively too much in human capital before 1975, but has not invested enough since 1990.
|Date of creation:||May 2013|
|Date of revision:||May 2013|
|Contact details of provider:|| Web page: http://www.amse-aixmarseille.fr/en|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cremers, Emily T., 2006. "Dynamic efficiency in the two-sector overlapping generations model," Journal of Economic Dynamics and Control, Elsevier, vol. 30(11), pages 1915-1936, November.
- Akos Valentinyi & Berthold Herrendorf, 2008.
"Measuring Factor Income Shares at the Sectoral Level,"
IEHAS Discussion Papers
0803, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
- Takahashi, Harutaka & Mashiyama, Koichi & Sakagami, Tomoya, 2012. "Does The Capital Intensity Matter? Evidence From The Postwar Japanese Economy And Other Oecd Countries," Macroeconomic Dynamics, Cambridge University Press, vol. 16(S1), pages 103-116, April.
- Docquier, Frédéric & Paddison, Oliver & Pestieau, Pierre, 2006.
"Optimal Accumulation in an Endogenous Growth Setting with Human Capital,"
IZA Discussion Papers
2081, Institute for the Study of Labor (IZA).
- Docquier, Frederic & Paddison, Oliver & Pestieau, Pierre, 2007. "Optimal accumulation in an endogenous growth setting with human capital," Journal of Economic Theory, Elsevier, vol. 134(1), pages 361-378, May.
- DOCQUIER, Frédéric & PADDISON, Oliver & PESTIEAU, Pierre, . "Optimal accumulation in an endogenous growth setting with human capital," CORE Discussion Papers RP 2021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Frederic, DOCQUIER & Oliver, Paddison & Pierre PESTIEAU, 2006. "Optimal accumulation in an endogenous growth setting with human capital," Discussion Papers (ECON - Département des Sciences Economiques) 2006022, Université catholique de Louvain, Département des Sciences Economiques.
- David Evans & Haluk Sezer, 2004. "Social discount rates for six major countries," Applied Economics Letters, Taylor & Francis Journals, vol. 11(9), pages 557-560.
- Galor, Oded, 1992. "A Two-Sector Overlapping-Generations Model: A Global Characterization of the Dynamical System," Econometrica, Econometric Society, vol. 60(6), pages 1351-86, November.
- Zuleta, Hernando & Young, Andrew T., 2013.
"Labor shares in a model of induced innovation,"
Structural Change and Economic Dynamics,
Elsevier, vol. 24(C), pages 112-122.
- Michele Boldrin & Ana Montes, 2005.
"The Intergenerational State Education and Pensions,"
Review of Economic Studies,
Oxford University Press, vol. 72(3), pages 651-664.
- Boldrin, Michele & Montes, Ana, 2002. "The Intergenerational State: Education and Pensions," CEPR Discussion Papers 3275, C.E.P.R. Discussion Papers.
- Michele Boldrin & Ana Montes, 2004. "The intergenerational state: education and pensions," Staff Report 336, Federal Reserve Bank of Minneapolis.
- Chanda, Areendam, 2008.
"The rise in returns to education and the decline in household savings,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 32(2), pages 436-469, February.
- Areendam Chanda, 2005. "The Rise in Returns to Education and the Decline in Household Savings," Macroeconomics 0502034, EconWPA.
- Areendam Chanda, . "The Rise in Returns to Education and the Decline in Household Savings," Departmental Working Papers 2005-05, Department of Economics, Louisiana State University.
- Bond, Eric W. & Wang, Ping & Yip, Chong K., 1996. "A General Two-Sector Model of Endogenous Growth with Human and Physical Capital: Balanced Growth and Transitional Dynamics," Journal of Economic Theory, Elsevier, vol. 68(1), pages 149-173, January.
- Marion Davin & Karine Gente & Carine Nourry, 2012.
"Social optimum in an OLG model with paternalistic altruism,"
AccessEcon, vol. 32(4), pages 3417-3424.
- Marion Davin & Karine Gente & Carine Nourry, 2011. "Social Optimum in an OLG Model with Paternalistic Altruism," Working Papers halshs-00644094, HAL.
- Kazuo Mino & Kazuo Nishimura & Koji Shimomura & Ping Wang, 2008.
"Equilibrium dynamics in discrete-time endogenous growth models with social constant returns,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(1), pages 1-23, January.
- Kazuo Mino & Kazuo Nishimura & Koji Shimomura & Ping Wang, 2005. "Equilibrium Dynamics in Discrete-Time Endogenous Growth Models with Social Constant Returns," Discussion Papers in Economics and Business 05-34, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
When requesting a correction, please mention this item's handle: RePEc:aim:wpaimx:1330. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yves Doazan)
If references are entirely missing, you can add them using this form.