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Economic growth and complementarity between stages of human capital

Listed author(s):
  • Ferreira, Pedro Cavalcanti
  • Delalibera, Bruno Ricardo

We study the impact of the different stages of human capital accumulation on the evolution of labor productivity in a model calibrated to the U.S. from 1961 to 2008. We add early childhood education to a standard continuous time life cycle economy and assume complementarity between educational stages. There are three sectors in the model: the goods sector, the early childhood sector and the formal education sector. Agents are homogenous and choose the intensity of preschool education, how long to stay in formal school, labor effort and consumption, and there are exogenous distortions to these four decisions. The model matches the data very well and closely reproduces the paths of schooling, hours worked, relative prices and GDP. We find that the reduction in distortions to early education in the period was large and made a very strong contribution to human capital accumulation. However, due to general equilibrium effects of labor market taxation, marginal modification in the incentives for early education in 2008 had a smaller impact than those for formal education. This is because the former do not decisively affect the decision to join the labor market, while the latter do. Without labor taxation, incentives for preschool are significantly stronger.

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File URL: http://bibliotecadigital.fgv.br/dspace/bitstream/10438/16646/3/Economic-growth-and-complementarity-between-stages-of-human-capital-.pdf
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Paper provided by FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) with number 779.

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Date of creation: 29 Jun 2016
Handle: RePEc:fgv:epgewp:779
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  1. You, Hye Mi, 2014. "The contribution of rising school quality to U.S. economic growth," Journal of Monetary Economics, Elsevier, vol. 63(C), pages 95-106.
  2. James Heckman & Flavio Cunha, 2007. "The Technology of Skill Formation," American Economic Review, American Economic Association, vol. 97(2), pages 31-47, May.
  3. Córdoba, Juan Carlos & Ripoll, Marla, 2013. "What explains schooling differences across countries?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 184-202.
  4. James Heckman & Rodrigo Pinto & Peter Savelyev, 2013. "Understanding the Mechanisms through Which an Influential Early Childhood Program Boosted Adult Outcomes," American Economic Review, American Economic Association, vol. 103(6), pages 2052-2086, October.
  5. Andrés Erosa & Tatyana Koreshkova & Diego Restuccia, 2010. "How Important Is Human Capital? A Quantitative Theory Assessment of World Income Inequality," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1421-1449.
  6. Diego Restuccia & Guillaume Vandenbroucke, 2014. "Explaining Educational Attainment across Countries and over Time," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 824-841, October.
  7. Daniela Del Boca & Christopher Flinn & Matthew Wiswall, 2014. "Household Choices and Child Development," Review of Economic Studies, Oxford University Press, vol. 81(1), pages 137-185.
  8. Rui CASTRO & Daniele COEN-PIRANI, 2014. "Explaining the Evolution of Educational Attainment in the U.S," Cahiers de recherche 11-2014, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Diego Restuccia & Richard Rogerson, 2008. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 707-720, October.
  10. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, Elsevier.
  11. Abington, Casey & Blankenau, William, 2013. "Government education expenditures in early and late childhood," Journal of Economic Dynamics and Control, Elsevier, vol. 37(4), pages 854-874.
  12. Rodolfo E. Manuelli & Ananth Seshadri, 2014. "Human Capital and the Wealth of Nations," American Economic Review, American Economic Association, vol. 104(9), pages 2736-2762, September.
  13. Pedro Cavalcanti Ferreira & Samuel de Abreu Pessoa, 2007. "The Effects of Longevity and Distortions on Education and Retirement," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 472-493, July.
  14. Eric A. Hanushek & Steven G. Rivkin, 1997. "Understanding the Twentieth-Century Growth in U.S. School Spending," Journal of Human Resources, University of Wisconsin Press, vol. 32(1), pages 35-68.
  15. Todd Schoellman, 2016. "Early Childhood Human Capital and Development," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(3), pages 145-174, July.
  16. James Heckman & Pedro Carneiro, 2003. "Human Capital Policy," NBER Working Papers 9495, National Bureau of Economic Research, Inc.
  17. Todd Schoellman, 2012. "Education Quality and Development Accounting," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 388-417.
  18. James J. Heckman & Seong Hyeok Moon & Rodrigo Pinto & Peter Savelyev & Adam Yavitz, 2010. "A New Cost-Benefit and Rate of Return Analysis for the Perry Preschool Program: A Summary," NBER Working Papers 16180, National Bureau of Economic Research, Inc.
  19. Diego Restuccia & Carlos Urrutia, 2004. "Intergenerational Persistence of Earnings: The Role of Early and College Education," American Economic Review, American Economic Association, vol. 94(5), pages 1354-1378, December.
  20. Orazio P. Attanasio, 2015. "The Determinants Of Human Capital Formation During The Early Years Of Life: Theory, Measurement, And Policies," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 949-997, December.
  21. Rob Grunewald & Arthur J. Rolnick, 2003. "Early childhood development = economic development," Fedgazette, Federal Reserve Bank of Minneapolis, issue Mar, pages 1-14.
  22. Diego Restuccia & Guillaume Vandenbroucke, 2014. "Explaining Educational Attainment across Countries and over Time," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 824-841, October.
  23. William Blankenau & Xiaoyan Youderian, 2015. "Early childhood education expenditures and the intergenerational persistence of income," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 334-349, April.
  24. Rangazas, Peter, 2000. "Schooling and economic growth: A King-Rebelo experiment with human capital," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 397-416, October.
  25. Peter Rangazas, 2002. "The Quantity and Quality of Schooling and U.S. Labor Productivity Growth (1870-2000)," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(4), pages 932-964, October.
  26. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352-352.
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