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Literacy Traps: Society-Wide Education and Individual Skill Premia

  • Atal, Vidya

    (Cornell University)

  • Basu, Kaushik

    (Cornell University)

  • Gray, John

    (Cornell University)

  • Lee, Travis

    (Cornell University)

Using a model of O-ring production function, the paper demonstrates how certain communities can get caught in a low-literacy trap in which each individual finds it not worthwhile investing in higher skills because others are not high-skilled. The model sheds light on educational policy. It is shown that policy for promoting human capital has to take the form of a mechanism for solving the coordination failure in people's choice of educational strategy.

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Paper provided by Cornell University, Center for Analytic Economics in its series Working Papers with number 09-05.

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Date of creation: Feb 2009
Date of revision:
Handle: RePEc:ecl:corcae:09-05
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  1. Roland Benabou, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 619-652.
  2. Azam Mehtabul, 2010. "India's Increasing Skill Premium: Role of Demand and Supply," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-28, October.
  3. Mukul Majumdar & Tapan Mitra, 1995. "Patterns Of Trade And Growth Under Increasing Returns: Escape From The Poverty Trap," The Japanese Economic Review, Japanese Economic Association, vol. 46(3), pages 207-223, 09.
  4. Jorge Saba Arbache & Andy Dickerson & Francis Green, 2004. "Trade Liberalisation and Wages in Developing Countries," Economic Journal, Royal Economic Society, vol. 114(493), pages F73-F96, 02.
  5. Redding, Stephen, 1996. "The Low-Skill, Low-Quality Trap: Strategic Complementarities between Human Capital and R&D," Economic Journal, Royal Economic Society, vol. 106(435), pages 458-70, March.
  6. Dechert, W. Davis & Nishimura, Kazuo, 1983. "A complete characterization of optimal growth paths in an aggregated model with a non-concave production function," Journal of Economic Theory, Elsevier, vol. 31(2), pages 332-354, December.
  7. James E. Rauch, 1991. "Productivity Gains From Geographic Concentration of human Capital: Evidence From the Cities," NBER Working Papers 3905, National Bureau of Economic Research, Inc.
  8. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Benjamin F. Jones, 2008. "The Knowledge Trap: Human Capital and Development Reconsidered," NBER Working Papers 14138, National Bureau of Economic Research, Inc.
  10. Jean Dreze & Geeta Gandhi Kingdon, 1999. "School participation in rural India," LSE Research Online Documents on Economics 6666, London School of Economics and Political Science, LSE Library.
  11. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
  12. Majumdar, Mukul & Mitra, Tapan, 1982. "Intertemporal allocation with a non-convex technology: The aggregative framework," Journal of Economic Theory, Elsevier, vol. 27(1), pages 101-136, June.
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