The Human Capital Constraint: Of Increasing Returns, Education Choice and Coordination Failure

Shekhar Aiyar

The B.E. Journal of Macroeconomics, 2003, vol. 3, issue 1, 16

Abstract: If technological innovations in the North can be costlessly imitated by educated workers in the South, and if education decisions are endogenous, why aren't all countries well-educated and rich? This paper explores a possible answer: if technologically advanced sectors, operating under increasing returns to scale, need a minimum pool of educated workers to commence production, then coordination failure can arise in the choice of education. A simple two-sector model is shown to yield multiple equilibria: countries that perform well educationally and adopt technology successfully can co-exist with countries that fail in both endeavors.

Keywords: Increasing Returns; Education Choice; Coordination Failure (search for similar items in EconPapers)
Date: 2003
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DOI: 10.2202/1534-5998.1071

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