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Industrialization versus Education: Optimal Investment Choices and Growth in a Developing Economy
Author(s) -
Robertson Peter E.
Publication year - 2000
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/1467-9361.00086
Subject(s) - economics , industrialisation , endogenous growth theory , capital deepening , physical capital , welfare , human capital , investment (military) , developing country , productivity , capital accumulation , capital (architecture) , capital good , capital intensity , labour economics , macroeconomics , financial capital , capital formation , market economy , economic growth , goods and services , archaeology , politics , political science , law , history
Recent growth theory has focused on the role of human capital as a source of welfare gains in developing economies, rather than traditional sources such as improving resource allocation and physical capital accumulation. This paper examines traditional developing‐country labor market problems in a Uzawa–Lucas endogenous growth model. Numerical solutions show that policies which promote human capital accumulation can have significant short‐term costs, and lower overall welfare improvements, than policies that give similar productivity improvements in the physical‐capital or final‐goods sector.