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Inflation and human capital formation : theory and panel data evidence







  • L. POZZI


Existing monetary growth theories predict either negative or neutral effects from inflation on human capital. In this paper we develop a simple alternative model, which can generate positive effects. Our empirical analysis for 93 countries in 1975-1995 tends to confirm these positive effects. Using recent GMM panel data procedures, we find that rising inflation basically stimulates human capital. A robust negative effect can be observed only at extremely high inflation rates. A representative threshold may be 100%. For inflation rates below 15%, the effect of rising inflation seems insignificant. The latter result can also be rationalized from our model.

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Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 03/174.

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Length: 32 pages
Date of creation: Apr 2003
Date of revision:
Handle: RePEc:rug:rugwps:03/174
Contact details of provider: Postal: Hoveniersberg 4, B-9000 Gent
Phone: ++ 32 (0) 9 264 34 61
Fax: ++ 32 (0) 9 264 35 92
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  3. Stephen Bond & Frank Windmeijer, 2002. "Finite Sample Inference for GMM Estimators in Linear Panel Data Models," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C6-3, International Conferences on Panel Data.
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