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Education and Growth: A Simple Model with Complicated Dynamics

We construct a simple model of education and growth in which young adults (children) spend a fraction of their time and old adults (parents) spend a fraction of their income on education. Both a strategic complementarity and an intergener- ational externality in the creation of human capital are present. The interactions between each pair of consecutive generations lead to rich dynamics. We show that multiple growth equilibria arise, some of them periodic and some aperiodic. We also ?nd a negative correlation between volatility and growth, without a one-way causal relationship between the two being, necessarily, present. Rather this negative correlation is driven by the structural characteristics of the economy.

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Paper provided by Department of Economics, University of Macedonia in its series Discussion Paper Series with number 2009_08.

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Date of creation: Apr 2009
Date of revision: Apr 2009
Handle: RePEc:mcd:mcddps:2009_08
Contact details of provider: Web page: http://www.uom.gr/index.php?tmima=3

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  1. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
  2. Klaus, WAELDE, 2003. "Endogenous growth cycles," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2004012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 15 Mar 2004.
  3. Kiminori Matsuyama, 1996. "Growing Through Cycles," Discussion Papers 1203, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Keith Blackburn & Dimitrios Varvarigos, 2008. "Human capital accumulation and output growth in a stochastic environment," Economic Theory, Springer, vol. 36(3), pages 435-452, September.
  5. Grandmont Jean-michel, 1983. "On endogenous competitive business cycles," CEPREMAP Working Papers (Couverture Orange) 8316, CEPREMAP.
  6. C. Berti Ceroni, 1998. "Poverty Traps and Human Capital Accumulation," Working Papers 315, Dipartimento Scienze Economiche, Universita' di Bologna.
  7. Theodore Palivos & Dimitrios Varvarigos, 2009. "Intergenerational Complementarities in Education and the Relationship between Growth and Volatility," Discussion Papers in Economics 09/8, Department of Economics, University of Leicester.
  8. Robert J. Barro, 2001. "Human Capital and Growth," American Economic Review, American Economic Association, vol. 91(2), pages 12-17, May.
  9. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
  10. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
  11. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  12. Glomm, Gerhard, 1997. "Parental choice of human capital investment," Journal of Development Economics, Elsevier, vol. 53(1), pages 99-114, June.
  13. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  14. Femminis, Gianluca, 2001. " Risk-Sharing and Growth: The Role of Precautionary Savings in the "Education" Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 63-77, March.
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