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Missing Markets for Human Capital and Differences in Growth
Author(s) -
PereraTallo Fernando
Publication year - 2005
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.0013-0427.2005.00413.x
Subject(s) - economics , physical capital , capital deepening , consumption (sociology) , investment (military) , human capital , rate of return , monetary economics , capital (architecture) , capital consumption allowance , financial capital , return of capital , capital formation , return on investment , macroeconomics , production (economics) , market economy , investment performance , finance , geography , social science , archaeology , sociology , politics , political science , law
Standard growth models predict that consumption and GNP growth rates should not differ among countries when international capital markets are considered. This paper introduces a generational structure which implies that the return on human capital exceeds the return on physical capital in equilibrium. Thus, when the return on human capital differs internationally, the growth rates of consumption and GNP vary across countries even when there is free capital mobility. Furthermore, GNP and GDP grow at the same rate within a country, there is positive investment in every country, and poverty traps persist in spite of international capital markets.