Our model of growth departs from both the Malthusian and neoclassical
approaches by including investments in human capital. We assume, crucially,
that rates of return on human capital investments rise, rather than, decline,
as the stock of human capital increases, until the stock becomes large. This
arises because the education sector uses human capital note intensively than
either the capital producing sector of the goods producing sector. This
produces multiple steady scares: an undeveloped steady stare with little
human capital, low rates of return on human capital investments and high
fertility, and a developed steady stats with higher rates of return a large,
and, perhaps, growing stock of human capital and low fertility. Multiple
steady states mean that history and luck are critical determinants of a
country's growth experience.
*Published:
Journal of Public Economics, October 1990
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