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Public versus Private Investment in Human Capital: Endogenous Growth and Income Inequality

Gerhard Glomm and B. Ravikumar
Journal of Political Economy
Vol. 100, No. 4 (Aug., 1992), pp. 818-834
Stable URL: http://www.jstor.org/stable/2138689
Page Count: 17
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Public versus Private Investment in Human Capital: Endogenous Growth and Income Inequality
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Abstract

In this paper, we present an overlapping generations model with heterogeneous agents in which human capital investment through formal schooling is the engine of growth. We use simple functional forms for preferences, technologies, and income distribution to highlight the distinction between economies with public education and those with private education. We find that income inequality declines more quickly under public education. On the other hand, private education yields greater per capita incomes unless the initial income inequality is sufficiently high. We also find that societies will choose public education if a majority of agents have incomes below average.

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