human capital Flashcards
dwhy should capital move from rich to poor countries in basic solow model?
large difference in y come from large differences in k and diminishing marginal product of capital
it means that returns to capital in poor countries must be much higher than that in rich so capital should move from rich to poor countries
what is human capital?
human capital shows the stock of skills
what is the average stock of human capital in the labour force?
it is equal to human capital per worker
what are the three components of empiracle definition of human capital according to the world bank?
survival from birth to school age measured using under 5 mortality rates
expected years of learning adjusted school, combining information on the quantity and quality of education
health -2 metrics : 1 adult survival rates ( the fraction of 15 year olds who survive until 60) +2 the rate of stunting for children under age 5
what is the general view of production function with human capital?
Y = F( K, H, EL) where K is physical capital, H is human capital, EL is effective labour force
what is the cobb douglas function for the production function with human capital?
Y = K^a * H^b *(EL)^(1-a-b)
if a+b=1 for the cobb douglas function with human capital what does this mean?
there is constant returns to all capital and raw labour does not matter
if a+ b is less than 0 for the cobb douglas function with human capital, what does this mean?
decreasing returns to all capotal
how is human capital accumulated
human capital is accumulated in the same manner as physical capital by suspending some part of aggregate income
what is the assumption for savings rate for both physical and human capital?
assume exogenous and constant savings rate for both physical and human capital which are both valued at between 0 and 1. they both have an identical depreciation rate
what is the equation for production function per worker including human capital?
y= k^ah^bE^(1-a-b)
what is the growth rate of output per worker?
g_y = ag_k+bg_h +(1-a-b)g_E
what is the production function per efficient worker?
y^~ = (k^~)^a * (h^~)^b
what are both types of capital change a result off?
it is a result of an interplay between gross investment and depreciation
what is the law of motion of physical capital per effective worker?
(k^~^.)= s_K*y^~ - ( δ + n + g_E) *k^~
what is the law of motion of human capital per effective worker?
(h^~^.) = s_Hy^~ - ( δ + n + g_E)h^~
what is the steady state in the dynamic system?
it is a resting point, two particular values k^~>0 AND h^~>0 such that if these values are ever reached, the economy stays at them forever ie y^~ is constant
what is the formula for the phase diagram for physical capital?
h^~ = ( δ + n + g_E/s_K)^[1/b] * K^~ ^(1-a/b)
what occurs when the values of h^~ is lower than the line K^~^.= 0,
physical capital per worker will be shrinking
what occurs for all values of h^~ when it is higher than the line H^~^. ?
human capital per worker will be shrinking
what are the two cases for returns to capital?
1) decreasing returns to all capital (k and h taken together): a+b<1, standard solow model assumption leading to lim(k-> infinity):g_k* = lim(k->infinity):g_h* = 0. growth in K and h will eventually fall to zero. thus having technological progress will remain the only source of providing economic growth on the BGP. un this case, there will be no source for a sustained increase in living standards
2) constant returns to all capital: a + b = 1, permanent growth is possible even under zero technological progress
what is the source of human capital in the solow framework?
the source of human capital forgoing consumption
what is the source of human capital in the lucas model?
the lucas model considers a representative consumer and introduces production function for human capital where the source of human capital is foregoing time
what is the lucas model production function?
Y=A F( K, hL) = A k^a (uhL)^(1-a) where u is a fraction of time spent working, h is a stock of human capital per person, L are units of raw labour, hL is the stock of human capital in the economy
what is the key idea of Lucas 1988?
production of the new human capital is proportional to existing human capital -> no diminishing marginal productivity
