Endogenous Growth when Unskilled Labour is Abundant

An extension of the Uzawa-Lucas endogenous growth model is discussed which incorporates diminishing returns to human capital and unskilled labour in aggregate labour inputs. This extension is important in the context of developing economies, due to their abundance of unskilled labour, relative to both physical and human capital stocks. The paper describes the pattern of growth and convergence that arises from these initial conditions, and from unanticipated increases in population growth rates. It shows that the transition path for a developing economy in this endogenous growth model, displays similar convergence properties to the standard neoclassical growth model, with a high initial marginal product of capital resulting in high growth over the transition.