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Schooling and Public Capital in a Model of Endogenous Growth
Author(s) -
AGÉNOR PIERRERICHARD
Publication year - 2011
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.1468-0335.2009.00794.x
Subject(s) - endogenous growth theory , economics , investment (military) , public infrastructure , human capital , public good , public spending , public capital , production (economics) , growth model , welfare , capital (architecture) , capital deepening , microeconomics , indeterminacy (philosophy) , developing country , public economics , public investment , financial capital , market economy , economic growth , capital formation , history , physics , archaeology , quantum mechanics , politics , political science , law
This paper studies the allocation of public spending between education services and infrastructure investment in an endogenous growth model of a developing economy where public capital in infrastructure affects human capital accumulation. The balanced growth path is derived and the possibility of local indeterminacy is discussed. Dynamics associated with a budget‐neutral reallocation of spending from education to infrastructure are studied through numerical simulations. The growth‐maximizing share of investment in infrastructure is shown to depend on the goods production technology and the ‘productiveness’ of infrastructure in the schooling technology. Properties of the welfare‐maximizing solution are also discussed.