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Does the Diversity of Human Capital Increase GDP? A Comparison of Education Systems

  • Katsuya Takii

    ()

    (Osaka School of International Public Policy, Osaka University)

  • Ryuichi Tanaka

    (Graduate School of Information Science and Engineering, Tokyo Institute of Technology)

This paper examines how different education systems affect GDP by influencing the diversity of human capital. We construct an overlapping generation model in which agents are heterogeneous in income and innate ability, and the final goods are produced with differentiated intermediate goods. We analyze an economy in which an income distribution converges to a stationary distribution. It is shown that the diversity of human capital induced by income inequality always lowers the GDP of the next period, while the diversity of human capital induced by heterogeneous ability can increase GDP, if the produced intermediate goods are sufficiently substitutable and firms have a large span of control. Hence, as public education equalizes education resources across households, it mitigates the negative effect of income inequality on GDP, while the effects of ability tracking crucially depend on the production structure of the economy.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0619.pdf
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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 06-19.

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Length: 33 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:osk:wpaper:0619
Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/
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