Working Paper: NBER ID: w26810
Authors: Isaac Ehrlich; Yun Pei
Abstract: Unlike physical capital, human capital has both embodied and disembodied dimensions. It can be perceived of as skill and acquired knowledge, but also as knowledge spillover effects between overlapping generations and across different skill groups within and across countries. We illustrate the roles these characteristics play in the process of economic development; the relation between income growth and income and fertility distributions; and the relevance of human capital in determining the skill distribution of immigrants in a balanced-growth global equilibrium setting. In all three illustrations, knowledge spillover effects play a key role. The analysis offers new insights for understanding the decline in fertility below population replacement rate in many developed countries; the evolution of income and fertility distributions across developing and developed countries; and the often asymmetric effects that endogenous immigration flows and their skill composition exert on the long-term net benefits from immigration to natives in source and destination countries.
Keywords: Human Capital; Knowledge Transfers; Economic Growth; Demographic Changes; Income Distribution
JEL Codes: F22; F43; J11; J24; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Exogenous technological advance in health (O49) | Increase in life expectancy (J17) |
| Increase in life expectancy (J17) | Increase in parental investment in children's human capital (J24) |
| Increase in parental investment in children's human capital (J24) | Transition from stagnant to persistent economic growth (O49) |
| Disembodied human capital and its spillover effects (J24) | Relationship between income growth and income inequality (D31) |
| Skill composition of immigrants (J69) | Long-term income growth and distribution in source and destination countries (F62) |
| Knowledge spillover effects from immigrants (J61) | Positive contribution to receiving economy (F69) |
| Knowledge spillover effects from immigrants (J61) | Brain drain in source economy (J61) |