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Endogenous education and long-run factor shares

Grossman, Gene M., Helpman, Elhanan, Oberfield, Ezra and Sampson, Thomas (2021) Endogenous education and long-run factor shares. American Economic Review: Insights, 3 (2). 215 - 232.

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Identification Number: 10.1257/aeri.20200350

Abstract

We study the determinants of factor shares in a neoclassical environment with capital-skill complementarity and endogenous education. In this environment estimates of the elasticity of substitution between capital and labor that fail to account for human capital levels will be biased upward. We develop a model with overlapping generations, technology-driven neoclassical growth, and ongoing increases in educational attainment. For a class of production functions featuring capital-skill complementarity, a balanced growth path exists and is characterized by an inverse relationship between the rates of capital-and labor-augmenting technological progress and the capital share in national income.

Item Type: Article
Official URL: https://www.aeaweb.org/journals/aeri
Additional Information: © 2021 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E25 - Aggregate Factor Income Distribution
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models
Date Deposited: 13 Oct 2020 09:06
Last Modified: 05 Aug 2021 23:15
URI: http://eprints.lse.ac.uk/id/eprint/106968

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