The conflating effects of education and financial competition in an OLG growth model with Nelson-Phelps human capital

Mark A Roberts

Discussion Papers from University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM)

Abstract: The Nelson-Phelps (N-P) concept of human capital, which determines the speed at which a new technology may be implemented, is considered within an AK, overlapping-generations model to produce a generalized dynamic form. Finance firms are assumed to act as local monopolies in the market for loans to production firms but as monopsonistic price-takers in the deposit market for households. Households also vote for taxes that are earmarked to pay for public education, which determines the subsequent level of N-P human capital. The main result is that a concentrated financial market structure, although directly lowering economic growth, may indirectly raise it through provoking a political economy response of voting for higher taxes to pay for a greater future, level of N-P human capital.

Date: 2012-07
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Persistent link: https://EconPapers.repec.org/RePEc:not:notcfc:12/07

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