Sustained output growth under uncertainty: A simple model with human capital |
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Authors: | Dimitrios Varvarigos |
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Affiliation: | aDepartment of Economics, University of Leicester, Astley Clarke Building, University Road, Leicester LE1 7RH, England |
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Abstract: | 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. |
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Keywords: | Growth Uncertainty |
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