Human Capital and Optimal Policy in a Lucas-Type Model

García-Castrillo, Pedro; Sanso, Marcos

doi:10.1006/redy.1999.0087

Cited by 24 publications

(14 citation statements)

References 12 publications

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“…Other work on the UzawaLucas model stresses particular features like the role of fiscal policy in guaranteeing an optimal decentralized equilibrium [García-Castrillo and Sanso (2000), Gómez (2003Gómez ( , 2005] and the efficiency of the competitive equilibrium under sector specific externalities associated to human capital in the goods sector [Gómez (2004[Gómez ( , 2006]. An additional note goes to the work of Restrepo-Ochoa and Vázquez (2004), who adopt a stochastic version of the two-sector model in order to compare results on fluctuations with the benchmark Real Business Cycles setup.…”

Section: Introductionmentioning

confidence: 99%

Decentralized Allocation of Human Capital and Nonlinear Growth

Gomes

2007

Comput Econ

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Abstract:The standard two-sector growth model with physical and human capital characterizes a process of material accumulation involving simple dynamics; constant long run growth is observable when assuming conventional Cobb-Douglas production functions in both sectors. This framework is developed under a central planner scenario: it is a representative agent that chooses between consumption and capital accumulation, on one hand, and between allocating human capital to each one of the two sectors, on the other. We concentrate in this second choice and we argue that the outcome of the aggregate model is incompatible with a scenario where individual agents, acting in a market economy, are free to decide, in each time moment, how to allocate their human capital in order to produce goods or to create additional skills. Combining individual incentives, the effort of a central planner (i.e., government) to approximate the decentralized outcome to the optimal result and a discrete choice rule that governs the decisions of individual agents, we propose a growth framework able to generate a significant variety of long term dynamic results, including endogenous fluctuations.

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Section: Introductionmentioning

confidence: 99%

Decentralized Allocation of Human Capital and Nonlinear Growth

Gomes

2007

Comput Econ

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“…This market failure may call for public intervention to correct it. In fact, García-Castrillo and Sanso [7] and Gómez [8] derive fiscal I wish to thank Sandra López Calvo and an anonymous referee for their valuable comments. Financial support from the Spanish Ministry of Science and Technology and FEDER through Plan Nacional de Investigación Científica, Desarrollo e Innovación Tecnológica (I+D+I) Grant SEC2002-03663 is gratefully acknowledged.…”

Section: Introductionmentioning

confidence: 99%

Optimality of the competitive equilibrium in the Uzawa-Lucas model with sector-specific externalities

Gómez

2004

Economic Theory

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“…However, an adequate government intervention can provide the required incentives to correct this market failure. García-Castrillo and Sanso (2000) derive a fiscal policy that is capable to make the decentralized equilibrium with externalities be optimal in the Uzawa-Lucas model. However, the optimal policy must resort to lump-sum taxation to be feasible, at least in the transitory phase.…”

Section: Introductionmentioning

confidence: 99%

Optimal fiscal policy in the Uzawa-Lucas model with externalities

Gómez

2003

Economic Theory

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This paper devises a fiscal policy by means of which the first-best optimum equilibrium is attained as a market equilibrium in the Uzawa-Lucas model when average human capital has an external effect on productivity. The optimal policy requires the use of a subsidy to investment in human capital which can be financed by a tax on labor income. Lump-sum taxation is not required to balance the government budget either in the steady state or in the transitional phase. Physical capital income should not be taxed. Alternatively, the optimal growth path can be attained by means of a subsidy to human capital. Copyright Springer-Verlag Berlin Heidelberg 2003Keywords and Phrases: Endogenous growth, Transitional dynamics, Optimal policy., JEL Classification Numbers: O41, E62.,

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Human Capital and Optimal Policy in a Lucas-Type Model

Cited by 24 publications

References 12 publications

Decentralized Allocation of Human Capital and Nonlinear Growth

Decentralized Allocation of Human Capital and Nonlinear Growth

Optimality of the competitive equilibrium in the Uzawa-Lucas model with sector-specific externalities

Optimal fiscal policy in the Uzawa-Lucas model with externalities

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