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Literacy Traps: Society-Wide Education and Individual Skill Premia

Author

Listed:
  • Atal, Vidya

    (Cornell University)

  • Basu, Kaushik

    (Cornell University)

  • Gray, John

    (Cornell University)

  • Lee, Travis

    (Cornell University)

Abstract

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.

Suggested Citation

  • Atal, Vidya & Basu, Kaushik & Gray, John & Lee, Travis, 2009. "Literacy Traps: Society-Wide Education and Individual Skill Premia," Working Papers 09-05, Cornell University, Center for Analytic Economics.
  • Handle: RePEc:ecl:corcae:09-05
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    References listed on IDEAS

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    1. Azam Mehtabul, 2010. "India's Increasing Skill Premium: Role of Demand and Supply," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 1-28.
    2. Jorge Saba Arbache & Andy Dickerson & Francis Green, 2004. "Trade Liberalisation and Wages in Developing Countries," Economic Journal, Royal Economic Society, vol. 114(493), pages 73-96, February.
    3. 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.
    4. Kremer, M & Maskin, E, 1996. "Wage Inequality and Segregation by Skill," Working papers 96-23, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    6. Michael Kremer & Edward Miguel & Rebecca Thornton, 2009. "Incentives to Learn," The Review of Economics and Statistics, MIT Press, pages 437-456.
    7. Benjamin F. Jones, 2008. "The Knowledge Trap: Human Capital and Development Reconsidered," NBER Working Papers 14138, National Bureau of Economic Research, Inc.
    8. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
    9. Dreze, Jean & Kingdon, Geeta Gandhi, 2001. "School Participation in Rural India," Review of Development Economics, Wiley Blackwell, vol. 5(1), pages 1-24, February.
    10. 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, September.
    11. 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.
    12. 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 458-470, March.
    13. Enrico Moretti, 2004. "Workers' Education, Spillovers, and Productivity: Evidence from Plant-Level Production Functions," American Economic Review, American Economic Association, vol. 94(3), pages 656-690, June.
    14. 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.
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    Cited by:

    1. repec:kap:reveho:v:15:y:2017:i:4:d:10.1007_s11150-015-9281-1 is not listed on IDEAS
    2. Gerhard Toews & Alexander Libman, 2017. "Getting Incentives Right: Human Capital Investment and Natural Resource Booms," Working Papers 370, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).

    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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