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From Physical to Human Capital Accumulation: Inequality and the Process of Development

  • Oded Galor

    (Brown University & Hebrew University)

  • Omer Moav

    (Hebrew University)

This paper develops a growth theory that captures the replacement of physical capital accumulation by human capital accumulation as a prime engine of growth along the process of development. It argues that the positive impact of inequality on the growth process was reversed in this process. In early stages of the Industrial Revolution, when physical capital accumulation was the prime source of growth, inequality stimulated development by channeling resources towards individuals with a higher propensity to save. As human capital emerged as a growth engine, equality alleviated adverse effects of credit constraints on human capital accumulation, stimulating the growth process.

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File URL: http://econwpa.repec.org/eps/ge/papers/0410/0410005.pdf
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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0410005.

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Length: 35 pages
Date of creation: 05 Oct 2004
Date of revision:
Handle: RePEc:wpa:wuwpge:0410005
Note: Type of Document - pdf; pages: 35
Contact details of provider: Web page: http://econwpa.repec.org

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