International migration,economic policy and human capital accumulation: a simulation study

"This paper examines the economic policy implications of international migration and human capital accumulation within a dynamic general equilibrium model. Each country produces by means of physical and human capital of two types (skilled and unskilled labour). Along optimal growth paths in a world of diverging population growth rates immigration can only be beneficial when the free rider effect (i.e., not paying for training costs) exceeds the capital dilution effect of an increase in population growth. Under quite general conditions the optimal immigration rate is zero."     

Human capital composition, growth and development: an R&D growth model versus data

The effect of human capital composition on growth and development has been somewhat neglected in economic literature. However, evidence has suggested the importance of engineering and technical (high-tech) skills to economic growth, and international organizations have suggested their shortage in developed countries. Using a standard increasing variety growth model, we propose various measures of human capital composition that are related with economic growth and development. When compared to data, the model does well in explaining the rate of growth and the level of development as a function of these measures. “the British colonies had a better educated population (...). Education was secular with emphasis on pragmatic skills and yankee ingenuity (...). The 13 British colonies had nine universities in 1776 for 2.5 million people. New Spain, with 5 million, had only two universities (...) which concentrated on theology and law.” –(Maddison, 2001)     

Human capital aggregation and relative wages across countries

Most of the growth accounting literature relies on an aggregate production function to determine the contribution of factors of production relative to that of total factor productivity (TFP) in explaining differences in incomes across countries. I show that the importance of TFP in accounting for cross-country income differences depends crucially on how skilled and unskilled labor are aggregated. Further, cross-country evidence on the relationship between relative wages and relative endowments of skilled and unskilled labor suggests that the two types of labor should not be aggregated into a single factor of production. Growth accounting decomposition using a commonly used nested-CES aggregate production function that allows skilled and unskilled labor to be used as separate factors of production results in a significantly greater role for TFP in accounting for income differences across countries than that found by past studies. The finding that different aggregate production functions lead to significantly different conclusions about the role of TFP in accounting for cross-country income differences calls for a more general approach to understanding such differences.     

The role of human and social capital in growth: extending our understanding

Human capital, institutions and social capital are now all recognisedas significant factors of growth. They have largely been studiedseparately, and although they present sufficient common characteristicsto be conceptualised as one main category distinct from physicalcapital, it may still be more important to focus on the linksbetween their specific sub-categories. Direct links with incomemay be spurious, as there appears to be a ‘web of associations’between the sub-categories, which would benefit from furtherempirical investigation. This paper reviews the literature onhuman capital, institutions and social capital, extracting threesub-categories of human capital (human skills capital, stock-of-knowledgeand entrepreneurship) and two of social capital (low- and high-rationalisation).Specific areas are then suggested for further empirical study.     

Human capital accumulation in an open labour market: Ireland in the 1990s

Large-scale investment in education in Ireland began in 1967 and has led to a dramatic increase in the relative supply of skilled labour over the past four decades. Furthermore the supply of labour in Ireland is traditionally highly elastic through migration, which in the 1990s was predominantly high-skilled. This combination of rising education levels and an open labour market meant that employment and incomes rose rapidly in the 1990s, while Ireland still maintained a strong competitive position in terms of relative labour costs.In this paper we develop a new macro-economic framework to formally analyse these mechanisms. We estimate a small structural model of the Irish labour market, separately identifying high-skilled and low-skilled labour. We find that this model captures key characteristics of the Irish labour market in the 1990s.     

On capital accumulation paths in a neoclassical stochastic growth model

Summary. Boldrin and Montrucchio [2] showed that any twice continuously differentiable function could be obtained as the optimal policy function for some value of the discount parameter in a deterministic neoclassical growth model. I extend their result to the stochastic growth model with non-degenerate shocks to preferences or technology. This indicates that one can obtain complex dynamics endogenously in a wide variety of economic models, both under certainty and uncertainty. Further, this result motivates the analysis of convergence of adaptive learning mechanisms to rational expectations in economic models with (potentially) complicated dynamics. Received: June 21, 1996; revised version: October 31, 1996     

Human capital,innovation capability and economic growth in Portugal, 1960-2001

In maintaining that the main flaw in empirical studies on economic growth derives from the fact that they employ Solow-style neoclassical growth models, rather than testing actual endogenous growth theory, we examine the human capital-innovation-growth nexus, thus testing new growth theory more directly. We test its insights against the economic evolution of an individual country, Portugal, using time series data from 1960 to 2001. Estimates based on vector autoregressive and cointegration analysis seem to confirm that human capital and indigenous innovation efforts were enormously important to the economic growth process in Portugal during the period of study. In particular, the indirect effect of human capital through innovation, emerges here as being critical, showing that a reasonably high stock of human capital is necessary to enable a country to reap the benefits of its indigenous innovation efforts.Received: November 2003, Accepted: November 2004, JEL Classification: C22, J24, O30, O40 Correspondence to: Aurora A.C. TeixeiraThe authors are grateful to two anonymous referees, Paulo Brito and the participants of the 2003 Portuguese Society for Economics Research (SPiE) in Lisbon, Portugal for helpful comments and suggestions. CEMPRE - Centro de Estudos Macroeconómicos e Previsão - is supported by the Fundação para a Ciência e a Tecnologia, Portugal, through the Programa Operacional Ciência, Tecnologia e Inovação (POCTI) of the Quadro Comunitário de Apoio III, which is financed by FEDER and Portuguese funds.     

Migration, human capital accumulation and economic development

We study how the possibility of migration changes the composition of human capital in sending countries, and how this affects development. In our model, growth is driven by productivity growth, which occurs via imitation or innovation. Both activities use the same types of skilled labour as input, albeit with different intensities. Heterogenous agents accumulate skills in response to economic incentives. Migration distorts these incentives, and the accumulation of human capital. This slows down, or even hinders, economic development. The effect is stronger, the farther away the country is from the technological frontier.     

A note on work–leisure choice, human capital accumulation, and endogenous growth

The growth model of Lucas [Lucas Jr., R.E., 1988. On the mechanics of economic development. Journal of Monetary Economics 22 (1), 3–42] is enriched with people having the opportunity to optimally allocate a fraction of their time to non-productive activities (‘leisure’). It is found that the chosen amount of leisure reduces the steady-state rate of growth of per capita output. This implies that the association between income and welfare may not be as strong as it is usually assumed to be. The optimal allocation of time among activities depends on some of the parameters and the marginal product of physical capital per capita.     

Culture and human capital in a two-sector endogenous growth model

Recent literature in the field of cultural economics highlights a possible inversion in the usual causality relation (from economic growth to culture) and points out that culture may represent an important driver of economic growth. By viewing culture in line with Throsby’s (2001) definition of cultural capital (i.e., an asset of tangible and intangible cultural expressions), in this article we analyze one possible channel through which culture may positively affect economic growth, namely the existence of a relationship of complementarity between cultural and human capital investments. Using a two-sector endogenous growth model, we find that in the long run a higher growth rate of real per-capita income can be attained the more cultural and human capital investments are complementary for each other in the process leading to agents’ skill acquisition. We also analyze the conditions under which an increase of the cultural capital share in total GDP can be conducive to a rise of real per-capita income.     

Human capital distribution, growth and convergence

This paper studies the dynamic relationship between distribution and endogenous growth in an overlapping generations model with accumulation of human and physical capital. It is shown how human capital can determine a relationship between per capita growth rates and inequality in the distribution of income. Family background effects and spillovers in the transmission of human capital generate dynamics in which aggregate variables depend not only on the stock, but also on the distribution of human capital. The evolution of this distribution over time is then characterized under different assumptions on private returns and the form of the externality in the technology for human capital. Conditions for existence, uniqueness and stability of a constant growth equilibrium with a stationary distribution are derived. Increasing returns, idiosyncratic abilities and the possibility of poverty traps are explicitely characterized in a closed form solution of the equilibrium dynamics, showing the role played by technology and preferences parameters.     

Population and economic growth with human and physical capital investments

We present a two-sector endogenous growth model with human and physical capital accumulation to analyze the long-run relationship between population growth and real per capita income growth. Formal education and investment in physical capital are assumed to be two separate components of human capital production. Along the balanced growth path equilibrium, population change may have a positive, negative, or else neutral effect on economic growth depending on whether physical and human capital are complementary/substitutes for each other in the formation of new human capital and on their degree of complementarity.

Sustained output growth under uncertainty: A simple model with human capital

In a model where agents use their labour/education choice to adjust their consumption profile over time, I show that the impact of uncertainty on growth depends, critically, on agents’ attitudes towards risk, reflected by the coefficient of relative risk aversion. In this respect, the well known result from the literature on ‘saving under uncertainty’ can be extended into a broader context, whereby the intertemporal profile of consumption is determined via human capital accumulation rather than saving and physical capital investment.     

Endogenous human capital accumulation, comparative advantage and direct vs. indirect redistribution

Recently, several papers have reexamined the so-called production efficiency theorem and the Atkinson and Stiglitz theorem on commodity taxes in the optimal taxation literature. Naito [J. Public Econ. 71 (1999) 65] showed that indirect redistribution through production distortion or consumption distortion can Pareto-improve welfare and that the two theorems do not necessarily hold when different factors are imperfect substitutes and factor prices are endogenous. On the other hand, Saez J. Public Econ. (2002) forthcoming argued that in the long run, where human capital accumulation is endogenous, the two theorems are still valid. This paper develops reasonable alternative models where individuals accumulate human capital based on their comparative advantage. The present paper shows that the production efficiency theorem is not necessarily valid and that indirect redistribution from the able to the less able such as tariffs and production subsidies can increase efficiency even when skill accumulation is endogenous.     

人力资本积累、收入分布演化与经济增长

本文建立了一个同时含有物质资本、人力资本积累及收入分布演化的内生增长模型,来研究人力资本积累、收入分布演化与经济增长的相互作用.我们发现,更高的初始收入差异将通过直接降低人力资本增长率与间接提高下一期的物质资本与人力资本比这两个渠道对经济增长率产生负面影响.另一方面,降低收入差异能获得更高的人力资本与经济增长率,这将使得低收入国家有可能追赶上高收入国家.     

Fluctuations in convex models of endogenous growth, I: Growth effects

Is there a trade-off between fluctuations and growth? The empirical evidence is mixed, with some studies finding a positive relationship, while others find a negative one. Our objectives are to understand how fundamental uncertainty affects the long run growth rate and to identify important factors determining this relationship in a convex endogenous growth model. Qualitatively, we show that the relationship between volatility in fundamentals (or policies) and mean growth can be either positive or negative. The curvature of the utility function is a key parameter that determines the sign of the relationship. Quantitatively, an increase in uncertainty always increases the growth rate in our calibrated models. Though the changes we find are nontrivial, they are not large enough by themselves to account for the large differences in growth rates observed in the data. We also find that differences in the curvature of preferences have very substantial effects on the estimated variability of stationary objects like the consumption–output ratio and hours worked. For this reason, we expect that the models considered in this paper will provide the basis of sharp estimates of the curvature parameter.     

Selective immigration policies, human capital accumulation and migration duration in infinite horizon

An increasing literature fosters selective immigration policies as a tool to increase human capital in both source and destination countries. These policies are supposed to prompt incentives to education, and–if selection is sufficiently severe–to increase the human capital stock in source countries. Nonetheless, when compared to open migration, selective policies make returns to education uncertain, and they may harm incentives to invest in human capital. As a consequence, they may reduce the human capital stock even though selection is “severe”. Moreover, when repeated migration is possible, they backfire on migration duration. We obtain our results in an infinite-horizon model that, unlike the current literature, places no restriction on the number of possible migration spells and allows for the possibility of a forced emigration.     

Human capital and leadership: the impact of cognitive and noncognitive abilities

We conduct an economic analysis about the impact of human capital on an individual’s potential of becoming a leader based on data from the Programme for the International Assessment of Adult Competencies Survey (PIAAC). Our human capital indicators include not only traditional measures such as education and experience, but also various measures of cognitive and noncognitive ability. Our cognitive ability measures include numeracy, literacy, and problem solving abilities, and noncognitive ability measures include perseverance, motivation to learn, and social trust. We specifically investigate the effect of measurement error and reverse causality on the estimation results. We find that problem-solving ability is the most important in affecting leadership among cognitive ability measures, and perseverance shows the strongest impact among noncognitive ability measures. As a leader supervises more employees, the role of cognitive and noncognitive ability becomes more critical.     

Endogenous mortality, human capital and economic growth

We consider growth and welfare effects of lifetime-uncertainty in an economy with human capital-led endogenous growth. We argue that lifetime uncertainty reduces private incentives to invest in both physical and human capital. Using an overlapping generations framework with finite-lived households we analyze the relevance of government expenditure on health and education to counter such growth-reducing forces. We focus on three different models that differ with respect to the mode of financing of education: (i) both private and public spending, (ii) only public spending, and (iii) only private spending. Results show that models (i) and (iii) outperform model (ii) with respect to long-term growth rates of per capita income, welfare levels and other important macroeconomic indicators. Theoretical predictions of model rankings for these macroeconomic indicators are also supported by observed stylized facts.     

Human capital, inequality, endogenous growth and educational subsidy: A theoretical analysis

This paper develops an endogenous growth model with dualism in human capital accumulation of two types of individuals. The government imposes a proportional income tax on rich individuals and uses the tax revenue to finance the educational subsidy given to poor individuals. We find out the properties of the optimal tax financed educational subsidy policy in the semi-stationary equilibrium of the model using the technique of Stackelberg differential game.