Working Paper

Alternatives in human capital accumulation: implications for economic growth

Abstract: This paper demonstrates that considering alternative means of human capital accumulation, such as learning-by-doing, overturns the presumption that formal education is unconditionally beneficial for economic growth. It analyzes a model in which the average level of human capital creates externalities in future human capital accumulation and individuals can augment their human capital with work experience or education. The model shows that in the early stages of development, education enhances growth by creating a positive externality, and, in later stages, it may depress growth by leading to a negative externality. It also demonstrates the possibility of multiple equilibria in which low-income equilibria are characterized by under-education and high-income equilibria are characterized by over-education.

Keywords: Economic development; Human capital;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 1996

Number: 550