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Availability of Higher Education and Long-Term Economic Growth

  • Akiomi Kitagawa


    (Faculty of Economics and Business Administration, Yokohama City University)

  • Ryo Horii


    (Graduate School of Economics, Osaka University)

  • Koichi Futagami


    (Graduate School of Economics, Osaka University)

This paper examines the relationship between the availability of higher education and an economyfs long-term growth rate in a simple endogenous growth model with overlapping generations. Under certain conditions, an increased availability of higher education narrows the rate-of-return difference between human and physical capital investments. This reduces the share of income received by the younger generation, negatively affecting aggregate savings in subsequent periods, and thereby causing a substantial slowdown in the long-term growth rate. Such a paradoxical slowdown is endemic to developed economies, where higher education plays a central role in accumulating human capital. Although the recovery from such a slowdown entails a major restructuring of educational institutions, the authority may not take preventative measures against it, being dazzled by a temporary boom during its early stages.

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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 03-14.

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Length: 37 pages
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:osk:wpaper:03-14
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