Low-Growth Equilibrium Accompanied by High Levels of Educational Attainment

The paper demonstrates the low-growth trap associated with high educational attainment in an overlapping-generations model by examining the dual positive effect of senior educated workers in leading-edge technology: on technological progress and on young workers' on-the-job learning. If new technology is sufficiently productive, young workers will demand education to update technology when old, and high technological growth is sustained in the future. Conversely, if new technology is unproductive, they will demand education merely to improve the skills necessary for existing technology, and technological progress will stagnate. Nevertheless, vigorous investment in education occurs since young workers have little hope for on-the-job learning.
JEL Classification Numbers: I20, J24, O33, O40.