From Physical to Human Capital Accumulation: Inequality in the Process of Development
Oded Galor and
Omer Moav ()
No 2307, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
This paper presents a unified theory that provides an intertemporal reconciliation between conflicting viewpoints about the effect of inequality on economic growth. It argues that the replacement of physical capital accumulation by human capital accumulation as a prime engine of economic growth has changed the qualitative impact of inequality on the process of development. In early stages of industrialization as physical capital accumulation is a prime source of economic growth, inequality enhances the process of development by channeling resources towards individuals whose marginal propensity to save is higher. In later stages of development, however, as the return to human capital increases due to capital-skill complementarity, human capital becomes the prime engine of growth and equality, given credit constraints, stimulating investment in human capital and economic growth. As wages increase, however, credit constraints become less binding and the overall effect of inequality becomes insignificant.
Keywords: Credit Constraints; Growth; Human Capital; Income Distributions (search for similar items in EconPapers)
JEL-codes: O11 O15 O40 (search for similar items in EconPapers)
Date: 1999-12
References: Add references at CitEc
Citations: View citations in EconPapers (41)
Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2307 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Journal Article: From Physical to Human Capital Accumulation: Inequality and the Process of Development (2004) 
Working Paper: From Physical to Human Capital Accumulation: Inequality and the Process of Development (2004) 
Working Paper: From Physical to Human Capital Accumulation: Inequality in the Process of Development (1999) 
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:cpr:ceprdp:2307
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=2307
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().