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Heterogeneous Agents and Economic Growth

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  • Koo Woong Park

    (Incheon City College)

Abstract

I study the effects of the distribution of individual abilities on economic growth using a Lucas (1988) type two-sector growth model. The relation between investment in education and individual education efficiency is positive but less than one-to-one, so the model predicts a negative relation between the variance of ability and aggregate investment in education via Jensen��s inequality theorem. As a result, a more homogeneous country is predicted to achieve a higher growth rate than a more heterogeneous country within finite time. This result obtains in the absence of any political mechanism commonly used in the inequality-growth literature. This novel feature remains robust to a convex education technology of Rebelo (1991).

Suggested Citation

  • Koo Woong Park, 2009. "Heterogeneous Agents and Economic Growth," Korean Economic Review, Korean Economic Association, vol. 25, pages 299-347.
    • Handle: RePEc:kea:keappr:ker-20091231-25-2-06
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    References listed on IDEAS

    as
    1. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(1), pages 35-52.
    2. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    3. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    4. Timothy Besley & Robin Burgess, 2003. "Halving Global Poverty," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 3-22, Summer.
    5. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Two-sector Growth Model; Education Efficiency; Heterogeneous Agents; Jensen��s Inequality Theorem; Convex Education Technology;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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