Question: Consider the endogenous growth model, where the future period quantity of human capital is a function of current human capital, which drives production and thus

 Consider the endogenous growth model, where the future period quantity of

Consider the endogenous growth model, where the future period quantity of human capital is a function of current human capital, which drives production and thus growth. In the competitive equilibrium, C = Y and human capital accumulation is characterized as follows: H' = b(1 - u)H, (4) where H' represents the future quantity of human capital, # represents the current quantity of human capital, b captures the efficiency of human capital accumulation and (1 - u) denotes the fraction of time devoted to human capital accumulation. (a) Find the growth rate of human capital. Be sure to show your work. (b) Find the growth rate of consumption. Be sure to show your work. (c) Use your answer from part (a) and (b), in addition to the fact that C = Y in equilibrium, to explain why the economy will grow indefinitely when b(1 - u) > 1. (d) The Canadian government subsidizes education for Canadian citizens. What is the economic rationale for this policy

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!