Human capital accumulation, income distribution, and economic growth: a demand-led analytical framework

Gilberto Lima, Laura Barbosa de Carvalho and Gustavo Pereira Serra

Review of Keynesian Economics, 2021, vol. 9, issue 3, 319-336

Abstract: This paper incorporates human capital accumulation through provision of universal public education by a balanced-budget government to a demand-driven analytical framework of functional distribution and growth of income. Human capital accumulation positively impacts on workers’ productivity in production and their bargaining power in wage negotiations. In the long-run equilibrium, a rise in the tax rate (which also denotes the share of output spent in human capital formation) lowers the pre- and after-tax wage share and physical capital utilization, and thus raises (lowers) the output growth rate when the latter is profit-led (wage-led). The impact of a higher tax rate on the employment rate (which also measures human capital utilization) in the long-run equilibrium is negative (ambiguous) when output growth is wage-led (profit-led). In any case, the supply of higher-skilled workers does not automatically create its own demand.

Keywords: human capital; income distribution; economic growth; employment rate (search for similar items in EconPapers)
JEL-codes: E12 E24 E25 O41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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