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Alternatives in human capital accumulation: implications for economic growth

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  • Murat F. Iyigun
  • Ann L. Owen

Abstract

This paper demonstrates that considering alternative means of human capital accumulation, such as learning-by-doing, overturns the presumption that formal education is unconditionally beneficial for economic growth. It analyzes a model in which the average level of human capital creates externalities in future human capital accumulation and individuals can augment their human capital with work experience or education. The model shows that in the early stages of development, education enhances growth by creating a positive externality, and, in later stages, it may depress growth by leading to a negative externality. It also demonstrates the possibility of multiple equilibria in which low-income equilibria are characterized by under-education and high-income equilibria are characterized by over-education.

Suggested Citation

  • Murat F. Iyigun & Ann L. Owen, 1996. "Alternatives in human capital accumulation: implications for economic growth," International Finance Discussion Papers 550, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:550
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    File URL: http://www.federalreserve.gov/pubs/ifdp/1996/550/default.htm
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    File URL: http://www.federalreserve.gov/pubs/ifdp/1996/550/ifdp550.pdf
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    References listed on IDEAS

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    1. Fershtman, Chaim & Murphy, Kevin M & Weiss, Yoram, 1996. "Social Status, Education, and Growth," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 108-132, February.
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    Cited by:

    1. Galor, Oded & Tsiddon, Daniel, 1997. "The Distribution of Human Capital and Economic Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 93-124, March.
    2. Schwalje, Wes, 2011. "Knowledge-based Economic Development as a Unifying Vision in a Post-awakening Arab World," MPRA Paper 30305, University Library of Munich, Germany.
    3. Schwalje, Wes, 2011. "A Conceptual Model of National Skills Formation for Knowledge-based Economic Development," MPRA Paper 30302, University Library of Munich, Germany.

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    Keywords

    Economic development ; Human capital;

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