Human Capital Accumulation According to HANK

Junya Inose

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: The heterogeneous model in macroeconomics has produced great developments in recent decades. One major development which includes heterogeneity relates to consumer behavior, especially in describing income and wealth inequality. More powerful and sophisticated computing technologies and the increasing availability of microdata have fueled these developments. Among these developments is the invention of the Heterogeneous agent New Keynesian (HANK) models. We advanced the Huggett model of income and wealth distribution to include human capital accumulation. The inclusion of human capital accumulation into a heterogeneous agent model enables us to capture not only wealth, but skill inequality and its dynamics. This paper provides two main contributions. We (i) construct a mathematical tool to analyze models with non-linearity, and (ii) provide implications for the policy of wealth redistribution, especially basic income. The conclusions of this analysis can be again summarized by the following three points: (i) the introduction of basic income may increase the share of liquidity constrained households, (ii) the introduction of basic income results in a decrease of the aggregate share of time spent investing in human capital, and (iii) the introduction of basic income may increase consumption and this may result in an increase in the interest rate.

Pages: 10 pages
Date: 2021-08
New Economics Papers: this item is included in nep-dge, nep-isf and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.rieti.go.jp/jp/publications/dp/21e070.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:21070

Access Statistics for this paper

More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC.
Bibliographic data for series maintained by TANIMOTO, Toko ().