Working Paper: NBER ID: w3413
Authors: Nancy L. Stokey
Abstract: A growth model is developed in which finite-lived individuals invest in human capital, and investments have a positive external effect on the human capital of later cohorts. Heterogeneous labor is the only factor of production, and higher-quality labor produces higher-quality goods. Stationary growth paths, along which human capital and the quality of consumption goods grow at a common, constant rate, are studied. It is also shown that if a small economy is very advanced or very backward relative to the rest of the world, then its rate of investment in human capital is lower under free trade than under autarky.
Keywords: human capital; product quality; economic growth
JEL Codes: O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Investment in human capital (J24) | Social stock of knowledge (O36) |
| Social stock of knowledge (O36) | Effectiveness of future investments in human capital (J24) |
| Higher-quality labor (J24) | Higher-quality goods (L15) |
| Investment in human capital (J24) | Effectiveness of future investments in human capital (J24) |
| Transition from autarky to free trade (F00) | Rate of human capital accumulation (J24) |