Stochastic accumulation of human capital and welfare in the Uzawa–Lucas model: an analytical characterization

Mizuki Tsuboi

Journal of Economics, 2018, vol. 125, issue 3, No 2, 239-261

Abstract: Abstract Stochastic growth models are often solved numerically, because they are not tractable in general. However, recent several studies find the closed-form solution to the stochastic Uzawa–Lucas model in which technological progress or population dynamics follow a Brownian motion process with one or two parameter restriction(s). However, they assume that the return on the accumulation of human capital is deterministic, which is inconsistent with empirical evidence. Therefore, I develop the Uzawa–Lucas model in which the accumulation of human capital follows a mixture of a Brownian motion process and many Poisson jump processes, and obtain the closed-form solution. Moreover, I use it to examine the nexus between human capital uncertainty, technological progress, expected growth rate of human capital, and welfare.

Keywords: Human capital; Welfare; Endogenous growth; Uncertainty (search for similar items in EconPapers)
JEL-codes: C61 J24 O33 O41 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:125:y:2018:i:3:d:10.1007_s00712-018-0604-6

DOI: 10.1007/s00712-018-0604-6

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