Knowledge stocks by distance to frontier: Linking low education inequality to high growth in developing countries

A growth model that endogenizes human capital formation helps to explain why high initial inequality is harmful for subsequent growth in developing countries. Sectors ranging from most to least skill-intensive interact for the creation and diffusion of technologies. The model explores exogenous high initial education inequality in developing countries with sectors that are or are not linked by positive knowledge spillovers. Endogenous diffusion is inadequate for self-financing of human capital and economic growth when there are not adequate inter-sector linkages. Empirical evidence shows that initial education inequality slows subsequent economic growth.