Human Capital Accumulation, Income Distribution and Economic Growth: A Neo-Kaleckian Analytical Framework

Gilberto Lima and Gustavo Pereira Serra
Authors registered in the RePEc Author Service: Laura Carvalho

No 2018_19, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper incorporates human capital accumulation through provision of universal public education by a balanced-budget government to a Neo-Kaleckian analytical framework of distribution and growth. Human capital accumulation positively impacts on workers’ productivity in output production and their bargaining power in wage negotiations. Differences in tax rates on wage and profit income have distributive implications for consumption and investment and so shape how effective demand varies with income distribution. In the long-run equilibrium, a rise in workers’ (capitalists’) bargaining power raises (lowers) the pre- and after-tax wage share, which raises (reduces) the rates of physical capital utilization, employment (which also measures the rate of human capital utilization) and output growth. Meanwhile, a rise in a uniform tax rate (which also denotes the share of tax spending in public education in output) lowers the long-run equilibrium values of the pre- and after-tax wage share and the rates of physical capital utilization, employment and output growth. Paradoxically, in the long-run equilibrium, a higher share of investment in human capital in output lowers the rate of human capital accumulation, with which output growth varies positively. A strengthening in the bargaining power of workers is output growth-enhancing in the long-run equilibrium, and it does so by raising the rates of accumulation of both physical and human capital.

Keywords: Human capital; income distribution; economic growth; employment (search for similar items in EconPapers)
JEL-codes: E12 E24 E25 O41 (search for similar items in EconPapers)
Date: 2018-11-12
New Economics Papers: this item is included in nep-gro, nep-mac and nep-pke
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