Human Capital Inequality, Life Expectancy and Economic Growth

This paper provides a theoretical model in which inequality affects per capita income when individuals decide to accumulate human capital depending on their life expectancy. The model assumes that life expectancy depends to a large extent on the environment in which individuals grow up, in particular, on the human capital of their parents. After calibrating the life expectancy function according to the international evidence for cross-section data, our results show the existence of multiple steady states depending on the initial distribution of education. In particular, human capital may converge towards different stable steady states. In accordance with the evidence displayed by many developing countries, the low steady state is a poverty trap in which children are raised in poor families, have a low life expectancy and work as non-educated workers all their lives.