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Idiosyncratic risk, investment in human capital, and growth


  • Duran, Jorge
  • Rillaers, Alexandra


We investigate the aggregate implications of individual specific uncertainty about returns to investment in education in the absence of insurance markets. We do so in a general equilibrium OLG model in which physical resources must be devoted to educations in order to accumulate human capital. We conclude that uncertainty with incomplete financial markets may strongly affect individual behavior but not the aggregate of the economy. Different degrees of uncertainty will induce different intensities of human to physical capital but will not have a significant impact on the long run growth rate of the economy.

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  • Duran, Jorge & Rillaers, Alexandra, 2001. "Idiosyncratic risk, investment in human capital, and growth," CEPREMAP Working Papers (Couverture Orange) 0104, CEPREMAP.
  • Handle: RePEc:cpm:cepmap:0104

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    References listed on IDEAS

    1. Sandra E. Black & Lisa M. Lynch, 2004. "What's driving the new economy?: the benefits of workplace innovation," Economic Journal, Royal Economic Society, vol. 114(493), pages 97-116, February.
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    4. Sandra E. Black & Lisa M. Lynch, 2001. "How To Compete: The Impact Of Workplace Practices And Information Technology On Productivity," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 434-445, August.
    5. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
    6. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
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    8. Caroli, Eve & Greenan, Nathalie & Guellec, Dominique, 2001. "Organizational Change and Skill Accumulation," Industrial and Corporate Change, Oxford University Press, vol. 10(2), pages 481-506, June.
    9. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
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    11. repec:dau:papers:123456789/10054 is not listed on IDEAS
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    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • I29 - Health, Education, and Welfare - - Education - - - Other

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