Human Capital and Patterns of Growth

Abstract

This paper addresses economic growth and its determinants, proposing an endogenous growth model. It examines the role of educational levels in early stages of development in closing gaps and achieving sustainable growth, considering a potential poverty trap. A trade-off between educational levels and net wages funded by labor taxes is highlighted. The model involves investors choosing technologies, leading to four possible equilibriums: permanent growth, steady state, steady state with low initial capital, and a cycle of permanent fluctuations. The importance of education in avoiding poverty traps is emphasized, but it is cautioned that the optimal choice of educational level may depend on short or long-term preferences of policymakers.