Human Capital Externality, Knowledge Spillover, and Sustainable Economic Growth

Xiangcai Meng () and Azhong Ye
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Azhong Ye: Department of Trade and Economics, College of Management, Fuzhou University

Annals of Economics and Finance, 2009, vol. 10, issue 1, 155-198

Abstract: We attempt to introduce human capital externality and endogenous laborleisure decision into the analytical framework constructed by Uzawa (1965) and Lucas (1988) simultaneously, so as to explore the internal relationship among endogenous labor supply, human capital externality and sustainable economic growth as well as the choice problem of government¡¯s education policy. The main conclusions of this thesis are as follows: 1. The sound degree of household¡¯s time endowment allocation and the magnitude of human capital externality will work on the height of the steady state¡¯s growth rate on the balanced growth path. 2. The larger the subjective time preference and the stronger the leisure awareness is, the lower the steady state¡¯s growth rate of the country will be; the larger the output elasticity and education investment expenditure elasticity of knowledge spillover becomes, the higher the steady state¡¯s growth rate of the country will be; and vice versa. 3. The government can choose from carrying out lump-sum output taxation or education subsidy to stimulate the adjustment of private labor supply and human capital investment, such that the decentralized economy could be induced to the sustainable optimal growth state. We employ China¡¯s province level panel data to analyze empirically, all the main conclusions are supported by the empirical research; meanwhile, we also observed some puzzles which are different from the existing conclusions.

Keywords: Human capital externality; Knowledge spillover; Sustainable economic growth; Education policy; Panel data model (search for similar items in EconPapers)
JEL-codes: E10 H52 I20 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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