Heterogeneous Agents and Economic Growth

Koo Woong Park
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Koo Woong Park: Incheon City College

Korean Economic Review, 2009, vol. 25, 299-347

Abstract: I study the effects of the distribution of individual abilities on economic growth using a Lucas (1988) type two-sector growth model. The relation between investment in education and individual education efficiency is positive but less than one-to-one, so the model predicts a negative relation between the variance of ability and aggregate investment in education via Jensen��s inequality theorem. As a result, a more homogeneous country is predicted to achieve a higher growth rate than a more heterogeneous country within finite time. This result obtains in the absence of any political mechanism commonly used in the inequality-growth literature. This novel feature remains robust to a convex education technology of Rebelo (1991).

Keywords: Two-sector Growth Model; Education Efficiency; Heterogeneous Agents; Jensen��s Inequality Theorem; Convex Education Technology (search for similar items in EconPapers)
JEL-codes: O15 O41 (search for similar items in EconPapers)
Date: 2009
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