Does the Diversity of Human Capital Increase GDP? A Comparison of Education Systems

Katsuya Takii and Ryuichi Tanaka
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Ryuichi Tanaka: Graduate School of Information Science and Engineering, Tokyo Institute of Technology

No 06-19, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP)

Abstract: This paper examines how different education systems affect GDP by influencing the diversity of human capital. We construct an overlapping generation model in which agents are heterogeneous in income and innate ability, and the final goods are produced with differentiated intermediate goods. We analyze an economy in which an income distribution converges to a stationary distribution. It is shown that the diversity of human capital induced by income inequality always lowers the GDP of the next period, while the diversity of human capital induced by heterogeneous ability can increase GDP, if the produced intermediate goods are sufficiently substitutable and firms have a large span of control. Hence, as public education equalizes education resources across households, it mitigates the negative effect of income inequality on GDP, while the effects of ability tracking crucially depend on the production structure of the economy.

Keywords: Span of control; Complementarities; Human capital; Ability tracking (search for similar items in EconPapers)
JEL-codes: D31 D72 H42 I22 O11 O15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-edu and nep-pbe
Date: 2006-07
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http://www2.econ.osaka-u.ac.jp/library/global/dp/0619.pdf (application/pdf)

Related works:
Journal Article: Does the diversity of human capital increase GDP? A comparison of education systems (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:osk:wpaper:0619

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