Barriers to capital accumulation in a model of technology adoption and schooling

Diego Restuccia

Journal of Economic Dynamics and Control, 2014, vol. 44, issue C, 81-91

Abstract: Standard growth models require large differences in barriers to capital accumulation to reproduce the observed disparities in the wealth of nations. I introduce technology adoption and schooling decisions into a standard growth model and show that the required differences in barriers implied by this model are much smaller. In particular, a calibrated version of the model implies per capita income differences 3 times larger than a standard model. Per capita income differences are amplified by two reinforcing factors: schooling capital differences and aggregate total factor productivity differences. The results suggest caution in the role of factor inputs derived from standard development accounting exercises. A development policy that subsidizes education is not optimal in the presence of barriers to capital accumulation, removing barriers can replicate educational outcomes and generate higher income levels by several orders of magnitude.

Keywords: Income differences; Technology adoption; Schooling; Distortions (search for similar items in EconPapers)
JEL-codes: I2 O1 O4 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188914000876
Full text for ScienceDirect subscribers only

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:eee:dyncon:v:44:y:2014:i:c:p:81-91

DOI: 10.1016/j.jedc.2014.04.006

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().