Article ID Journal Published Year Pages File Type
972839 Mathematical Social Sciences 2015 9 Pages PDF
Abstract

•The relative significance of physical capital accumulation vis-a-vis human capital accumulation.•Optimal physical and human capital accumulations depend on sectoral characteristics.•Relative capital intensity between sectors influences the scheme of optimal policy.

Should a country invest more in human or physical capital? Using a two-sector overlapping generations setting with endogenous growth driven by human capital accumulation, we prove that relative factor intensity between sectors drastically shapes the welfare analysis: two identical laissez-faire economies with different sectoral capital shares may generate physical capital excess or scarcity, with respect to the optimum. The design of optimal policy depends on the sectoral properties and the social planner discount rate.

Related Topics
Physical Sciences and Engineering Mathematics Applied Mathematics
Authors
, , ,