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Economic development and convergence clubs: the role of inherited tastes and human capital

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  • de la Croix, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

We present an overlapping generations model with endogenous growth in which children inherit from the previous generation human capital and life standard aspirations. Adults evaluate their own consumption with respect to a baseline requirement which depends on their parents past consumption. The presence of bequeathed tastes changes significantly the dynamic properties of the model. First, starting with too high aspirations or with too low education spendings lead the economy to a poverty trap. Second, the economy can be characterized by oscillations because inherit human capital may not be sufficient to cover the bequest in terms of higher aspirations. Third, the endogenous growth steady state can be surrounded by a repelling cycle which delimits an attraction basin.

Suggested Citation

  • de la Croix, David, 1996. "Economic development and convergence clubs: the role of inherited tastes and human capital," LIDAM Discussion Papers IRES 1996024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Oct 1996.
    • Handle: RePEc:ctl:louvir:1996024
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    References listed on IDEAS

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    Cited by:

    1. Rillaers, Alexandra, 1998. "Growth and Human Capital Accumulation under Uncertainty," LIDAM Discussion Papers IRES 1998020, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Toni Mora, 2005. "Conditioning factors on regional European clubs - a distributional approach," ERSA conference papers ersa05p302, European Regional Science Association.

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    More about this item

    Keywords

    endogenous growth; human capital; aspirations; poverty trap; limit cycle;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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