The Subsidy to Human Capital Accumulation in an Endogenous Growth Model

Download or read book The Subsidy to Human Capital Accumulation in an Endogenous Growth Model written by Jaime Alonso-Carrera and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes both the growth and the dynamic effects of the subsidy to human capital investment in a two-sector endogenous growth model. We show that the subsidy is growth-increasing, and it determines the dynamic behavior of the physical and human capital variables. Moreover, the economy reacts instantaneously to unanticipated changes in the subsidy rate. We prove that the jolt caused by the marginal introduction of the subsidy depends on whether the inverse of the elasticity of intertemporal substitution in consumption is larger than the elasticity of marginal productivity of labor with respect to physical capital.