An essay on human capital accumulation and economic growth

Abstract

The model of Solow (1956) is a seminal reference among the theories that seek to understand the cause of economic growth. In this model, it is not the factors of production (labor and capital) but the technical progress that gives rise to economic growth. Mankiw, Romer and Weil (1992) augment this model by introducing human capital accumulation and show empirically why the variables considered exogenous in Solow's model vary in such a remarkable manner among countries. Their results emphasize the importance of factors of production, particularly of human capital. This thesis is inspired by the arguments of Lucas (2015) who calls for the necessity of putting human capital at the center of economic growth without any source of externalities.

The novelty of the thesis is the formation of human capital à la Lucas (1988) in Ramsey (1928) model. By gradually adding different layers of complexity, the dissertation arrives at a unified picture of different source of economic growth, allowing for the interaction between physical and human capital where savings and time play a non-trivial role.

As is well-known, the Ramsey model in a certain way is equivalent to an OLG model with intergenerational altruism in the sense of Barro (1974). It is interesting to consider other forms of intergenerational altruism in presence of human capital accumulation. This thesis explores the impact of paternalistic altruism in the sense of Abel and Warshawsky (1988) in a heterogeneous economy where the agents differ in their degree of altruism, which is manifest in their manner of investment in the education of their offspring.

Education concerns not only the individuals but also public institutions. Investment in education to generate human capital can therefore be considered a public choice, that is to say, by the bias in public spending on education financed by tax revenues. We are interested in the dynamics associated with the interaction between the accumulation of physical and human capital, and consequently in economic growth. In this context, the impact of taxation policy on growth is also studied.

Many economic phenomena, for example, poverty trap and middle-income trap, can be analyzed in models where the concave property of the utility function no longer holds. For this reason, it would be useful to explore these models of non-concave technology in presence of human capital accumulation.