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Land-Rich Economies, Education and Economic Development

  • Sebastian Galiani
  • Daniel Heymann

We analyze the emergence of large-scale education systems in a setup where growth is associated with changes in the configuration of the economy. The model is based on three central elements: first, individual preferences over consumption goods generate changes in the composition of individual spending as income grows, embodied in Engel curves. Second, the production of sophisticated services is intensive in human capital. Third, investment in human capital by individual households faces borrowing constraints. Our model uses an overlapping generation framework similar to the one in Galor and Moav (2003). As that paper does, we also model the incentives that the economic ´elite may have (collectively) to accept taxation destined to finance the education of credit-constrained workers. In our model this incentive does not necessarily arise from a complementarity between physical and human capital in manufacturing. Rather, we emphasize the demand for human-capital-intensive services by high-income groups. The argument model seems capable to account for salient features of the development of Latin America in the 19th century, where, in particular, land-rich countries such as Argentina established an extensive public education system and a sophisticated service sector before developing significant manufacturing activities.

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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_048.

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Length: 27 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:deg:conpap:c010_048
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  1. Daron Acemoglu & Simon Johnson & James Robinson, 2004. "Institutions As The Fundamental Cause Of Long-Run Growth," DOCUMENTOS CEDE 002889, UNIVERSIDAD DE LOS ANDES-CEDE.
  2. Banerjee, Abhijit V & Newman, Andrew F, 1991. "Risk-Bearing and the Theory of Income Distribution," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 211-35, April.
  3. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  5. Daron Acemoglu & Simon Johnson & James Robinson & Pierre Yared, 2005. "Income and Democracy," NBER Working Papers 11205, National Bureau of Economic Research, Inc.
  6. Bourguignon, Francois & Verdier, Thierry, 2000. "Is financial openness bad for education? A political economy perspective on development," European Economic Review, Elsevier, vol. 44(4-6), pages 891-903, May.
  7. Galor, Oded & Moav, Omer, 2001. "Das Human Kapital," CEPR Discussion Papers 2701, C.E.P.R. Discussion Papers.
  8. Benabou, Roland, 1996. "Equity and Efficiency in Human Capital Investment: The Local Connection," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 237-64, April.
  9. Kenneth L. Sokoloff & Stanley L. Engerman, 2000. "Institutions, Factor Endowments, and Paths of Development in the New World," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 217-232, Summer.
  10. Oded Galor & Omer Moav & Dietrich Vollrath, 2005. "Land Inequality and the Emergence of Human Capital Promoting Institutions," Development and Comp Systems 0502018, EconWPA.
  11. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
  12. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
  13. Syrquin, M. & Chenery, H.B., 1989. "Patterns Of Development, 1950 To 1983," World Bank - Discussion Papers 41, World Bank.
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