NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Human Capital Investment, Inequality and Economic Growth

Kevin M. Murphy, Robert H. Topel

NBER Working Paper No. 21841
Issued in January 2016
NBER Program(s):Labor Studies

We treat rising inequality is an equilibrium outcome in which human capital investment fails to keep pace with rising demand for skills. Investment affects skill supply and prices on three margins: the type of human capital in which to invest; how much to acquire; and the intensity of use. The latter two represent the intensive margins of human capital acquisition and utilization. These choices are substitutes for the creation of new skilled workers, yet they are complementary with each other, magnifying inequality. When skill-biased technical change drives economic growth, greater inequality reduces growth.

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Document Object Identifier (DOI): 10.3386/w21841

Published: Kevin M. Murphy & Robert H. Topel, 2016. "Human Capital Investment, Inequality, and Economic Growth," Journal of Labor Economics, vol 34(S2), pages S99-S127.

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