How inequality hurts growth: Revisiting the Galor-Zeira model through a Korean case

Bogang Jun, Mary Kaltenberg and Won-sik Hwang ()
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Won-sik Hwang: Korea Institute for Industrial Economics and Trade

No 2017-034, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: This paper aims to show that the level of inequality increases via the human capital channel with credit market imperfections generating negative effects on economic growth. We expand the model presented by Galor and Zeira (1993) to represent the fact that the economy benefits from endogenous technological progress and that the government provides financial aid to reduce the financial hurdles for human capital accumulation. We use Korean data from 1998 to 2008 to empirically confirm that education plays a significant role in the divergence of household wealth over time and that the government's financial aid package in the form of the new student loans programme positively influences equality and short-run economic growth by promoting the number of skilled workers.

Keywords: Human Capital; Economic Growth; Inequality; South Korea (search for similar items in EconPapers)
JEL-codes: I24 I25 O15 (search for similar items in EconPapers)
Date: 2017-08-11
New Economics Papers: this item is included in nep-gro
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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2017034

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